October 4, 2010 | last updated May 29, 2012 10:36 pm

Power Down € Prices Up | Vermont nuclear fight drains Connecticut

If Vermont's nuclear plant shuts down as expected in 2012, Connecticut's already-high electricity prices seem certain to go up again.

And that has state officials taking a fresh look at their options.

The political and regulatory fight in Vermont over the continued operation of the 650-megawatt nuclear power plant in Vernon will have lasting impacts on New England's electricity pricing and the reliability of the regional power grid.

Since New England wholesale prices are set regionally and based upon available generation, Connecticut would have little control over the effects of the Vermont power drain. As Connecticut is an importer of electricity, these out-of-state battles further cement the state's notorious reputation for high electricity costs, which rank the second highest in the nation.

"This system is not in the interest of Connecticut ratepayers," said State Sen. John Fonfara, D-Hartford.

Due to concerns over safety and environmental impacts, the Vermont Legislature is reluctant to extend a 20-year operating agreement with the Vermont Yankee nuclear plant, which also must renew its 20-year operating license with the Nuclear Regulatory Commission by March 21, 2012.

The Vermont Senate in February voted against the nuclear plant's license renewal due in part to grassroots opposition against the plant, but Vermont Yankee can revisit the issue in following legislative sessions. In the meantime, the Town of Brattleboro — where the nuclear company is headquartered — has a non-binding resolution scheduled for the Nov. 2 ballot suggesting the power plant property to taken by eminent domain so the facility can be shut down.

The uncertainty forced Vermont Yankee to try to back out of its 2013-2014 contract to supply power to ISO New England, which predicts regional demand and determines wholesale electricity prices. ISO balked at Vermont Yankee's attempt, saying its nuclear power is vital to the reliability of the grid.

Before the Vermont Yankee troubles arose, preliminary results of an ISO study showed Vermont already had reliability problems. Since 34 percent of Vermont's electric supply comes from nuclear, its loss could lead to thermal overloads on transmission lines, instability in the regional grid and blackouts.

The loss of Vermont Yankee would drop the grid beneath the reliability standards established by Congress in the wake of the August 2003 blackouts, meaning an alternative source of power would have to be found. Since Vermont — like Connecticut — uses more power than it generates, the state must improve transmission and/or import power from less-efficient, more costly plants.

"All of these options come with a cost, and Vermont has very little sources of generation," said Ellen Foley, ISO spokeswoman.

With Vermont replacing the relatively cheap nuclear power with more expensive, less efficient generators, that will drive up electricity costs for all New England.

When ISO sets the daily wholesale electricity price for the region, it predicts how much demand is expected. The not-for-profit organization then contracts with enough power generators to meet the daily demand. The daily cost of those contacts is the same for every generator and based on the highest bid from the last accepted generator when the predicted demand is met, a system called the Uniform Clearing Price. So, one generator could offer to sell its electricity at $20 per megawatt hour; but if ISO accepts a bid from someone else at $60 per megawatt hour, the $20 generator — along with everyone else — will be paid $60 per megawatt hour.

Unlike other forms of power, nuclear reactors must run constantly, so nuclear facilities such as Vermont Yankee and Connecticut's Millstone in Waterford often will bid $0 for the ISO daily contracts just so they are paid whatever the actual contract price turns out to be.

If Vermont Yankee shuts down, its low-cost 650 megawatts used to meet regional demand will be replaced by whatever more expensive generation replaces it. That new source will likely demand the highest price and thus will drive up the regional wholesale price .

Vermont Yankee's 650 megawatts seem like a small drop in the daily 16,000-28,000 megawatt demand in the ISO New England service territory, but any move to a more expensive power generation source would drive up price.

"The cost of nuclear is in building the facility, and then the cost of generating is dirt cheap," Fonfara said. "A nuclear power plant is much better than any other form."

In Connecticut, the maximum production by all the power plants is 7,900 megawatts; and the peak electricity demand for the state is 7,261. The gap is the result of high-cost 'peaker plants' run during peak demand.

On top of wholesale prices, each ISO state pays costs of transmission. Congestion on the Connecticut grid and losses from sending power over long distances drives the state's electricity prices 15-16 percent higher than the rest of New England, and rank behind only Hawaii in the nation.

In an effort to reduce energy costs, Connecticut lawmakers have talked at length about removing ISO's policy using the Uniform Clearing Price, replacing it with a paid-as-bid system where power generators' daily contracts are based upon actual costs.

Earlier this year, the Connecticut General Assembly passed an Energy Bill co-authored by Fonfara forcing ISO to change its pricing policy within one year.

"We believe that is a significant factor in why we pay so much for generation," Fonfara said.

Although Gov. M. Jodi Rell vetoed the Energy Bill, Fonfara said the issue will arise next year.

Before the Connecticut General Assembly meets in January, ISO New England will finish its study of Vermont's power needs. The solutions will be proposed in 2011.

Any proposed solutions to Vermont Yankee's loss may take too long, as the plant's license expires with the Nuclear Regulatory Commission in March 2012. If it gets an NRC renewal, the facility needs a positive vote from the legislature for a 20-year Certificate of Public Good from Vermont Public Service Board.

"We are stymied in doing that," said Larry Smith, Vermont Yankee manager of communications. "This has turned a regulatory issue into a political issue."

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