The economic viability of the Millstone Nuclear Power Station in Waterford, the largest power plant in New England and a crucial factor in Connecticut’s commitment to reduce greenhouse gases, is about to become a major issue in Hartford.
With a special hearing Thursday, the legislature’s Energy and Technology Committee is opening a public conversation over whether the state should act this year to increase the profitability of nuclear power to protect Connecticut’s biggest source of carbon-free electricity.
The hearing comes at the instigation of Dominion Resources, the owner of Millstone, after a spate of early closings of nuclear plants, including two that the state of New York hurriedly tried to save with new economic incentives.
“One thing we really wanted was transparency,” said Rep. Lonnie Reed, D-Branford, the committee co-chair. “We want to get it out there. Let’s have this conversation out in public and look at what’s going on, how other states are responding, how other stakeholders are responding.”
The falling price of natural gas has driven down the price of electricity, a deregulated commodity that is purchased daily on the spot market by ISO-New England, the operator of the regional power grid.
The administration of Gov. Dannel P. Malloy is warily reviewing possible tweaks in an energy market that is deregulated, yet heavily influenced by state policymakers who try to ensure competitive prices, reliable sources and simultaneously lower carbon emissions.
Dominion has not publicly threatened to close Millstone, nor has it given assurances that the station, which has one retired reactor and two operating units, can remain economically viable until its licenses to operate the remaining reactors expire in 2035 and 2045.
“Millstone is a good asset. We run it well,” said Kevin R. Hennessy, the station’s director of state and federal governmental affairs. “That doesn’t mean we are immune to pressures.”
Those pressures are not unique to Dominion.
Entergy Corp. announced late last year it would close the FitzPatrick nuclear power plant in upstate New York in January 2017 – 17 years before its relicensing date. Exelon plans to close Ginna, another upstate nuclear plan. It is licensed to operate for another 15 years.
In New England, Entergy closed Vermont Yankee in 2014 and has announced plans to close Pilgrim station in Plymouth, Mass., in 2017, each with a generating capacity of less than 700 megawatts. The only remaining nuclear plants in the region will be the larger 1,246-megawatt Seabrook in New Hampshire and Millstone, whose two reactors can generate 2,080 megwatts.
Katie Dykes, the deputy commissioner of Energy and Environmental Protection, said the state has an obvious interest in the health of Millstone: It currently can generate enough electricity to supply more than half of Connecticut’s needs, while producing zero carbon emissions.
Without Millstone, the state probably would rely on gas-fired plants to take up the slack, increasing carbon emissions by 27 percent, according to an assessment by the state. The state is now working to hit certain goals for reducing greenhouse gases by 2020 and 2050.
The absence of Millstone also could make the state overly reliant on natural gas to produce electricity, probably driving prices up unless transmission capacity into the state were improved or other generating sources were developed.
Millstone also is a major contributor to the economy of southeastern Connecticut. According to the company, it employs 1,100 workers at an average annual salary of $100,000 each.
Dykes is expected to deliver a briefing Wednesday to the governor and is one of eight invited witnesses at the hearing Thursday. After the invited witnesses testify, the hearing will be opened to the public.
The lead witness is scheduled to be Evan Bayh, the former U.S. senator and governor of Indiana, who is now the co-chair of Nuclear Matters, a bipartisan, industry-funded group that promotes a continued role for nuclear power. He also is a partner in McGuireWoods, a legal and lobbying firm in Washington, D.C., whose clients include Dominion. The company is a funder of Nuclear Matters, Hennessy said.
Elin Katz, the state consumer counsel, and Arthur H. House, the chairman of the Public Utilities Regulatory Authority, have been invited.
Other witnesses include two senior officials of Dominion, a diverse energy company based in Richmond, Va. The publicly traded company has a market capitalization of $43.94 billion and is trading at $73.63, up from a 52-week low of $64.54 but below its peak price of $76.59.
Dominion insulates itself from the highs and lows of the spot market by selling its energy from Millstone through a series of futures contracts that run for three years.
“We try to take away the volatility,” Hennessy said.
But Reed and her co-chair, Sen. Paul Doyle, D-Wethersfield, said they believe the company was alarmed by the paucity of bidders when it recently went to the futures market.
“They had a lot of bids, and now they are down,” Doyle said.
“That’s a huge trigger, and that’s real data,” Reed said. “They still won’t show us their damn books, but that’s real data, and that’s telling them something. They are market guys. That’s what they do.”
Hennessy said Dominion is not seeking specific legislation, nor is it saying when or if it sees Millstone becoming unprofitable.
“I don’t know if that date and time is a month from now, five months from now, 10 months from now, 100 months from now or never,” Hennessy said. “What I do know, and which is critical, is that business decisions tend to get made faster than political ones – not just political, but policy as well.”
The deadline is past for the Energy and Technology Committee to propose new legislation, but a committee bill that would create a study on the diversity of energy sources could be amended if legislators decide to act before the 2016 session ends in six weeks.
In New York, Gov. Andrew Cuomo has been simultaneously trying to convince Entergy to keep open FitzPatrick and give up on relicensing Indian Point, the aging plant on the Hudson River that he says is too close to New York City.
Cuomo directed regulators to devise a “clean energy standard” by June that would enhance the profitability of three upstate nuclear plants – FitzPatrick, Ginna and Nine Mile Point – by making them eligible for “zero emission credits” if they can show financial distress.
Entergy says the plan offers no certainties and is not enough to reverse its decision to close FitzPatrick.
In Illinois, Exelon announced two years ago it might close three nuclear plants because of competition from cheap natural gas. The company later sought a “low carbon portfolio standard” that would have produced $300 million annually through a monthly charge of about $2 on every customer.
The bill stalled, but Exelon postponed two of the closures.
“This is a broader industry issue,” Hennessy said.
Malloy infuriated Dominion in his first years in office, when he faced an inherited deficit, by imposing a temporary generation tax on what then was an undeniably profitable Millstone plant. But Hennessy said the company sees the administration and legislature as acting quickly to examine the current rate structure.
“What I want to be clear about, we want to give credit to the legislature and DEEP,” Hennessy said. “They recognized an issue. They are doing something now that is public and proactive.”