Nuclear generation tax draws broad opposition

A legislative plan to tax the state’s two active nuclear power plants could threaten jobs, send the wrong message to businesses and lead to higher electricity rates, lawmakers, municipal officials, business and labor leaders and the operators of the plants warned Wednesday.

“This targeted, seemingly vindictive initiative would undermine and destabilize an entire region of our state,” Sen. Andrea L. Stillman, D-Waterford, said during a press conference. The two power plants are in Waterford. “Senate bill 1176 would send our entire state in absolutely the wrong direction with regard to economic development.”

David Christian, Dominion CEO 4-13-11

Dominion CEO David Christian

The proposal, which passed out of the legislature’s Energy and Technology Committee by a 12 to 9 vote, would create a tax on nuclear, oil-fueled and coal-fired electric generation, with nuclear plants paying a far higher rate than the other facilities. According to the legislature’s nonpartisan Office of Fiscal Analysis, the tax would raise $342.6 million a year, $335 million of which would come from nuclear generation.

The money would be used to pay off bonds authorized last year that would otherwise be paid for by a surcharge on electric consumers and a raid on energy conservation funds. After that, the money would be used to fund clean and renewable energy projects and to provide ratepayer relief.

On Wednesday, critics of the proposal called it vindictive, targeted at one business and unfairly aimed at nuclear power.

David Christian, CEO of Dominion Generation, which owns and operates the Millstone power plants in Waterford, said there are two possibilities if the tax were enacted.

“One would be that rates would go up due to the fact that the higher cost would be passed on to the consumers through higher electric rates,” he said. “Or the plant would become uneconomic to operate and it would be forced into closure, following which electric rates would increase as well.”

But Dominion officials signaled that they would be open to alternatives to help close the state’s budget deficit. When asked about a separate proposal by Gov. Dannel P. Malloy to increase the tax on electricity generation, Christian said, “The concept of temporary shared sacrifice to help the governor in his goal would be a matter for discussion.”

Daniel A. Weekley, Dominion’s vice president for government affairs, said the company opposes Malloy’s tax proposal, which would tax all generation sources and raise about $58.4 million. But he noted that the company “is a strong supporter of Governor Malloy” and has been trying to work with him on alternatives.

“There are a number of different options on the table,” Weekley said in response to questions about Christian’s comment on temporary shared sacrifice. “I don’t think we want to limit it to exclusively a temporary tax, but certainly that is one of the avenues that could be pursued.”

The energy committee’s bill would replace Malloy’s proposal. When asked about the legislative bill, Juliet Manalan, Malloy’s press secretary, said the governor still supports his own proposal.

The committee bill has drawn support from House Speaker Christopher G. Donovan, D-Meriden; the state Office of Consumer Counsel; Environment Connecticut, a nonprofit conservation advocacy group; and ConnPIRG. Rep. Vickie Nardello, D-Prospect, who co-chairs the committee, has said it would provide relief to ratepayers and protect clean energy.

In testimony on the bill, Consumer Counsel Mary J. Healey said the tax would lead Millstone to “simply earn less profit” and would not lead to higher electric rates for consumers. It would not lead the company to produce less power at the facility, she said, because technical and regulatory constraints would keep nuclear power plants from ramping up and down rapidly.

The Office of Fiscal Analysis report said any effect on ratepayers from the tax would likely occur after the 2013 fiscal year, when the sales contracts for the plants expire.

Christian said it would be unwise to operate a nuclear power plant on thin margins. He and others, including legislators from both parties, representatives of business groups and organized labor, described the economic impact of the plants, which employ nearly 1,100 people. Dominion commissioned a study that suggested that the plant provides $1.2 billion in economic value to the state and is linked to 4,200 jobs in the region.

Waterford First Selectman Dan Steward said Millstone represents 30 percent of the town’s tax base, paying $22 million a year, and has provided fields for the towns and donations to local charities. The proposed bill has already affected the town’s bond rating, he said.

Dominion currently pays about $35 million in state and local taxes, Weekley said.