A long-awaited assessment of the energy market released Monday by the state Department of Energy and Environmental Protection and the Public Utilities Regulatory Authority does not resolve questions about the economic viability of the region’s biggest provider of carbon-free electricity, the Millstone nuclear station at Waterford.
State energy officials said in a draft report they cannot be sure of the profitability of Millstone without further financial information from its owner, Dominion Energy, leaving open the question of whether Millstone will be able to sell its electricity on more favorable terms as an “at-risk” resource. A final version of the assessment is due to the legislature by Feb. 1.
“I think this process outlines a way for Connecticut to go forward,” said Katie Dykes, the chair of PURA.
The draft recommends DEEP conduct a procurement for new and existing sources of carbon-free electricity, but warned that Millstone’s bid would be judged solely on price unless Dominion proves the plant is at risk. If deemed at risk, Millstone’s bid could be judged on a broader criteria, presumably generating a higher return for Dominion.
Dominion initially declined to provide confidential financial data sought in August by DEEP and PURA, which were directed in an executive order issued by Gov. Dannel P. Malloy to assess the overall energy market and the economic viability of Millstone, which is capable of producing half of Connecticut’s electric needs.
Levitan & Associates, a consultant hired by the agencies, concluded based on the best publicly available information that the two active reactors at Millstone “are economically viable under expected market conditions through 2035 and thus unlikely to retire prior to that date.”
But after Malloy signed a law authorizing DEEP and PURA to change energy procurement rules based on the assessment, Dominion submitted “a two-page summary of high-level, short term forward financial projections on November 30, 2017, and a longer, redacted document on January 10, 2018,” the agencies said.
The data could not be independently verified by the two agencies, but it raised questions about Millstone’s viability.
“Lack of access to audited operational data and costs caused by Dominion’s incomplete response to the data requests in this proceeding creates uncertainty in the state’s assessment of the financial viability of Millstone Nuclear Units,” the agencies said in the draft. “Dominion’s unknown return requirements and expectations on return on investment could lead to an unanticipated retirement decision.”
The agencies took the data submitted in November and January and completed “sensitivity scenarios,” assessing the impact on Millstone’s long-term viability, assuming the data was accurate.
“Additional detailed, auditable financial data, such as that requested from Dominion in August, would be necessary to verify the accuracy of asserted cost figures to warrant changing inputs to the LAI [Levitan & Associates] model,” the agencies said. “Constraints imposed by the timing of the Dominion submissions, the need for verification, and complexity of the detailed LAI analysis made it impossible for DEEP and PURA to verify the cost assumptions asserted in this proceeding.”
Dominion responded positively to the draft.
“On behalf of the 1,500 dedicated women and men working at Millstone Power Station, Dominion Energy thanks DEEP and PURA for their exhaustive work on this appraisal and for their conclusion to conduct a procurement for new and existing zero carbon facilities. The final appraisal is clear,” Paul Koonce, the chief executive of Dominion’s power generating group, said a statement. “Millstone is vital for Connecticut to meet its cheaper, cleaner and more reliable energy goals and aggressive carbon reduction goals. Dominion Energy is committed to continuing to work with state energy officials to achieve those goals.”
Kevin Hennessy, who oversees government affairs for Dominion in New England, said the company intends to continue working with DEEP and PURA to provide the agencies with an accurate assessment of Millstone’s finances. “We’re fully committed to working with them,” he said.
Sen. Paul Formica, R-East Lyme, a co-chair of the Energy and Technology Committee whose district includes Waterford, also praised the draft report.
“This is welcome news for our entire state,” he said. “Connecticut is taking an important step forward to stabilize the state’s largest energy provider to benefit ratepayers across New England. Millstone provides over half the power for Connecticut on a daily basis. Ensuring Millstone’s stability while we work towards building a future system that includes more renewable energy resources is needed to preserve reliability and affordability.”
Others were dubious.
“The resource assessment continues to confirm that Millstone does not currently need any financial support through 2035 from ratepayers to be profitable, and Connecticut’s investments are better directed towards renewables for our future,” said Claire Coleman of the Connecticut Fund for the Environment. “At the same time, if managed carefully, DEEP’s proposed procurement process seems to include some protections for ratepayers and the potential for more strategic investments in new renewable resources like energy storage.”
John Erlingheuser of AARP, a consumer group, said Dominion has not demonstrated it needs a different procurement process, a point he intends to make to DEEP and PURA during a public comment period that ends Jan. 25.
“I’m hoping to change their minds,” Erlingheuser said. If not, he said, AARP will hold them to their promise to only judge Millstone’s bids on price “without full financial information they are in distress.”
The state’s two major utilities, Eversource and United Illuminating, no longer generate power; they buy electricity in a fast-changing commodity market and then deliver it over a transmission system that is still regulated, its rates set based on what PURA finds is the cost of service and a reasonable rate of return.
Electricity is bought and sold in three markets that offer a mix of short- and long-term prices: a “Day-Ahead Energy Market,” a so-called balancing market in which prices can change in minutes, and longer-term transactions between buyers and sellers.
The law passed in October allows the commissioner of DEEP to direct Eversource and United Illuminating to purchased zero-carbon energy from Millstone and other sources if their bids are deemed to be in the best interests of ratepayers.
Natural-gas fired plants generate about half the region’s electricity and tend to set the market price. As the cost of natural gas has fallen, it has depressed the price that Millstone and other nuclear plants can command for their electricity.