Millstone I

Tax issues and economic vulnerability make Connecticut’s nuclear power plant one of 12 most at risk of shutdown, according to a new academic study.

The report from the Institute for Energy and the Environment at Vermont Law School comes just two months after Connecticut legislators balked at extending a controversial tax on power generators for another two years.

Millstone also is one of 38 nuclear facilities the report says is at risk of early retirement not only due to taxes, but also from competition from lower-cost energy sources, shrinking demand, costly repairs and other rising operating costs.

Nine major nuclear reactors either have closed or abandoned plans to increase their maximum power capacity over the past few months.

“Recent developments have sent what are truly shock waves through the industry and Wall Street,” said Mark Cooper, the institute’s senior fellow for economic analysis and author of the report. “The spate of early retirements and decisions to forego uprates magnify the importance of the fact that the “nuclear renaissance” has failed to produce a new fleet of reactors in the U.S.

“With little chance that the cost of new reactors will become competitive with low-carbon alternatives, … we need to start preparing now for more early retirements” of nuclear plants.

The fear that the two plants at Millstone Point could be pushed into early retirement prompted lawmakers in the spring to dump most of a proposal from Gov. Dannel P. Malloy to extend what was supposed to be a one-year tax on power plants for another 24 months.

The tax raised about $70 million last fiscal year. Millstone’s owner, Richmond, Va.-based Dominion Resources, paid about 60 percent of those funds. And company officials said that while the cost hadn’t been passed onto the electricity market — and ultimately onto ratepayers — in the first year, things would change if there was a two-year extension.

About a dozen legislators, primarily from the state’s southeastern corner where Millstone is located, began organizing opposition almost immediately.

They argued that consumer rates would be at risk of rising. Millstone generates 17 million megawatt hours per year, about 45 percent of the state’s annual power needs.

The attorneys general of Rhode Island and Massachusetts agreed, and since Millstone is the largest power generator for the network that serves New England, they sent letters to Connecticut officials urging them to end the generator tax.

But many Connecticut lawmakers also were worried about the nearly 1,100 full-time jobs at Millstone Point, and what would happen to the southeastern corner’s labor base if the plants were to close early.

Dominion already has been scaling back its generation capabilities in the Northeast.

It sold a coal-powered plant in Salem, Mass., last August and recently reached an agreement to sell another coal-burning facility in Brayton Point, Mass.

The company also closed a nuclear plant in Kewaunee, Wisc., in May for economic reasons and will gradually eliminate 600 jobs there as the facility is decommissioned.

“It was very important to the economy in that part of the state” to end the tax soon, said Rep. Patricia Widlitz, D-Guilford, co-chairwoman of the tax-writing Finance, Revenue and Bonding Committee. “The conversation among the Finance (committee) caucus, and among all of my colleagues, was that we had to understand a commitment was made” to limit the tax to one year.

The finance panel proposed ending the tax as originally scheduled on June 30 of this year, and replacing the lost revenue with additional borrowing.

And even after new estimates in late April reduced expectations for tax revenues in the new state budget, lawmakers resisted another push from the administration to maintain the generator tax for two more years.

A final compromise did extend the tax, but only for three months, through Sept. 30.

“I think they (legislators) realized they didn’t want to have the only tax on electricity production in the country,” said Kevin Hennessy, director of government affairs for Dominion’s New England region. “They acknowledged what is happening in the industry and that there would be harm if this tax was continued” for two years.

Keith has spent most of his 31 years as a reporter specializing in state government finances, analyzing such topics as income tax equity, waste in government and the complex funding systems behind Connecticut’s transportation and social services networks. He has been the state finances reporter at CT Mirror since it launched in 2010. Prior to joining CT Mirror Keith was State Capitol bureau chief for The Journal Inquirer of Manchester, a reporter for the Day of New London, and a former contributing writer to The New York Times. Keith is a graduate of and a former journalism instructor at the University of Connecticut.

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