December 28, 2018

Millstone victorious in quest for CT power contract

HBJ File Photo
HBJ File Photo
Millstone Power Station's future is looking brighter, now that it's set to ink a long-term contract that will allow it to sell half of its annual output to Connecticut electric utilities.

Capping an approximately three-year lobbying push at the state Capitol by Dominion Energy, Connecticut's sole nuclear plant has won a state-assigned contract that will enable it to sell approximately half of its massive output to electric ratepayers over the next decade, state officials announced Friday.

"The Millstone nuclear facility is an extremely important resource providing efficient, reliable, baseload zero carbon electricity to the region as well as economic benefits to the state," the Department of Energy and Environmental Protection and Gov. Dannel Malloy's office said in announcing the deal, which comes in the final days of the Malloy administration.

"Make no mistake, we are facing a climate crisis with the future of the planet is at stake," Malloy said in a statement. "Despite President Trump's refusal to listen to scientists on this matter, the reality is that urgent and significant action is needed to dramatically reduce our dependence on carbon-based energy sources. In addition, we need to increase investments in clean energy like offshore wind, solar, and grid-scale storage. Should we fail to do so, we will fail to prevent the catastrophic outcomes that will result from climate change."

Also selected Friday for similar, albeit smaller contracts to sell electricity to Eversource and United Illuminating were New Hampshire's Seabrook Nuclear Power Plant, which will provide 230 megawatts of capacity; nine solar projects, which will provide 164 megawatts; and 100 megawatts for the offshore Revolution Wind project.

All selected winners still must finalize contracts with the Public Utilities Regulatory Authority (PURA).

Revolution already has an existing 200-megawatt contract awarded by state overseers in a separate competitive bidding process. Last week, PURA finalized Revolution's contract, along with deals for four fuel-cell projects, totaling 452 megawatts in all.

But Friday's announcement is far larger in scale. The total electric output covered by the agreements is equivalent to 45 percent of the power Connecticut draws from the New England grid annually. Combined, the generators selected for utility contracts are projected to produce 11.7 million megawatt hours of electricity a year, according to DEEP.

"We are pleased that Connecticut's regulators have selected Millstone's offer as being in the best interest of customers," said Paul Koonce, Dominion's CEO of power generation. "DEEP's decision is good news for Connecticut's economy and the environment."

Dominion says the Millstone deal will provide at least $670 million in net benefits to Connecticut ratepayers, as compared to a scenario in which the nuclear plant closed and its output was only partially replaced by other zero-carbon resources.

Another consideration for lawmakers who enabled the process that led to the contract was Millstone's economic presence. The plant employs 1,500 workers, with an annual payroll of more than $100 million, and pays $40 million in state and local taxes, according to Dominion.

Over the past few years, Dominion has sought to convince state lawmakers and regulators that it faces future financial risks too large to ignore. Should the plant close, it's likely that carbon-emitting plants, such as those fired by natural gas, would replace much of its output.

Other power plant owners, along with environmental groups and AARP criticized the prospect of a long-term contract for Millstone as a bailout or subsidy, arguing that the plant should be forced to open its books to prove its financial condition, and that giving it a long-term contract could raise electricity prices and suppress the development of renewable energy like solar and wind, which have grown in recent years thanks to similar DEEP-led, competitive bidding processes.

Dominion shared its financials confidentially with PURA and DEEP. PURA deemed the plant to be at risk of retirement starting in 2023, and DEEP concurred.

That at-risk designation, originally created by the legislature, gave Millstone a leg up in DEEP's scoring criteria for the dozens of bids it received in September.

Though Seabrook could have asked for the same at-risk status, it did not, officials said.

While the announcement is a major win for Millstone, the deal is not quite done. The first three years of Millstone's contract are based on its submitted bid price, which was not disclosed Friday, but DEEP said it wasn't satisfied with the rate of return Dominion wanted for the final seven years of the deal, calling it "not in the best interest of ratepayers." DEEP has ordered Eversource and UI to negotiate lower pricing for the later years of the contract. It set a March 31 deadline to finish those talks with Dominion.

"We remain committed to keeping this valuable zero-carbon resource, provided that it is affordable, as we work towards long-term replacement through smart investments in offshore wind and solar paired with grid-scale storage," DEEP Commissioner Rob Klee said. "At the same time, we believe ratepayers deserve, and can get, a more competitive price for Millstone's output."

UI parent Avangrid said Friday that it is reviewing DEEP's directives and said it is "encouraged that the state is seeking energy solutions that are in the best interest of ratepayers and the environment."

"We look forward to working with the Lamont Administration, along with DEEP and PURA, to advance future initiatives to make clean energy available to our customers at reasonable prices," the company said.

Eversource joint wind venture not picked

While ěrsted's Revolution Wind development tacked on another 100 megawatts to its long-term commitments from Connecticut, a separate 200-megawatt joint venture called Constitution Wind that ěrsted and Eversource jointly bid into the competition was not selected by DEEP.

Eversource, which was among those that expressed concern over the prospect of the state awarding a contract to Millstone, said the nuclear plant had a leg up in the latest competition for contracts.

"With more than 10 times as much capacity submitted as awarded, and with inherent advantages for existing nuclear capacity, we are disappointed but not surprised with the result of the DEEP RFP," Eversource spokeswoman Tricia T. Modifica said. "While we're certainly disappointed with DEEP's decision to solicit only 100 megawatts of offshore wind, we are excited by the considerable long-term growth opportunities that exist within the US offshore wind market."

A statement released Friday by ěrsted was a bit more upbeat.

"Offshore wind is fast becoming a centerpiece of Connecticut's renewable energy future," said Jeffrey Grybowski, Co-CEO of the company's U.S. offshore wind division. "We're proud that our Revolution Wind project will now deliver even more clean energy to Connecticut communities."

Solar contracts

The solar projects selected by DEEP include three in Connecticut and six outside the state.

DEEP said the prices utilities will pay for the solar power amounts to just under 5 cents per kilowatt hour. That price, the agency said, "is approaching parity with the market price of energy, and represents continued price reductions compared to our last procurement of grid scale solar, as well as additional savings to ratepayers."

In-state projects include Montville Energy Center, Black Hill Point Energy Center and Gravel Pit Solar.

The exact locations of each wasn't immediately clear. DEEP declined to give locations, citing the contract negotiation process that lies ahead with PURA. In many of the public versions of the bids submitted to DEEP several months ago, locations, financial information and various other project details were heavily redacted for perceived competitive reasons.

The out-of-state solar projects selected by PURA are located in New Hampshire and Maine, DEEP said.

Corrections:

  • A previous version of this story incorrectly stated that Eversource is a partner in ěrsted's Revolution Wind project.
  • A previous version of this story misstated the amount of energy that will be provided by Millstone under the contract, as compared to the other selected projects. While the portion of the nuclear plant's nameplate generating capacity selected for a contract represents approximately 75 percent of the total nameplate capacity of all the selected projects (a total of 1,524 megawatts, according to DEEP) Millstone is expected to provide a greater portion of the total megawatt-hours produced by all selected projects (a total of 11.7 million megawatt hours).
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