Millstone Nuclear Power Plant, Waterford, CT

Formica, Marx, Debate Energy Prices, Millstone Deal, in Southeast Connecticut Race

After a steep rate hike on July 1 by Eversource Energy was met with outrage from customers across Connecticut, the company – New England’s largest energy provider – responded by blaming the Connecticut legislature for forcing it into a long-term contract subsidizing Millstone Nuclear Power Plant in Waterford.

A bipartisan group of state and elected officials, including southeastern Connecticut lawmakers, passed legislation in 2017 that paved the way for Millstone owner Dominion Energy to bid for a long-term preferential contract usually reserved for new renewable sources like wind and solar power.

Dominion said at the time that it would close Millstone without the contract, leaving Connecticut customers  — where the plant provides about 40 percent of the state’s energy production – almost wholly dependent on fossil fuels, vulnerable to price swings and added reliability concerns. 

Dominion won its contract last year, and the deal was roundly praised by Gov. Ned Lamont. According to an April 15, 2019 press release by the Office of the Governor, the closure of Millstone “would have exposed the New England region to a nearly 25 percent increase in carbon emissions, increased risk of rolling blackouts, billions of dollars in power replacement costs, and the loss of more than 1,500 well-paying jobs right here in Connecticut.”

Most of those jobs would have been in the district of State Sen. Paul Formica, R- East Lyme, ranking member on the legislature’s Energy and Technology Committee, who championed the bill that made way for the agreement. The Millstone plant also directly and indirectly provides about a third of Waterford’s tax revenue.

According to an April 15, 2019 press release by the Office of the Governor, the closure of Millstone “would have exposed the New England region to a nearly 25 percent increase in carbon emissions, increased risk of rolling blackouts, billions of dollars in power replacement costs, and the loss of more than 1,500 well-paying jobs right here in Connecticut.”

After Eversource came under fire for the July rate hikes, Formica’s Democratic opponent in the race for State Senate, Martha Marx, took to Facebook to criticize him for opening the door to the deal. Marx said lawmakers didn’t weigh the impact it would have on ratepayers, and didn’t push hard enough to spread the cost of subsidizing Millstone across all the New England states that use its power.

“We need jobs, and I appreciate business and corporations, but we have to look at the consumer first,” Marx said. “There was no study done on the ratepayer impact, and it was putting all of the trust into Eversource that they would protect the ratepayer.”

Meanwhile, Katie Dykes, commissioner of Connecticut’s Department of Energy and Environmental Protection, seized on the controversy to claim that the regional grid operator, Independent System Operator New England, runs markets that favor natural gas, hurting renewable energy goals, reliability and price stability, forcing Connecticut ratepayers to subsidize its shortcomings.

Shutdown or subsidize

Dominion Energy told Connecticut legislators in 2016 that low wholesale energy prices would drive it to shut down the Millstone Nuclear Power Plant in Waterford. Abundant natural gas was selling at low prices on the wholesale energy market, driving down the price of other energy sources. 

Three years earlier, in 2013, Dominion shut down its nuclear power station in Kewaunee, Wis., claiming similar market pressures.

“Based on the information that we had of other plants that had closed down that were in a similar position, I do believe Millstone would have shut down without the power procurement agreement with Dominion,” said State Sen. Cathy Osten, D-Sprague, another proponent of letting Dominion enter the procurement process. 

An analysis at the time by consultants Levitan and Associates for the state found that the Millstone units would be profitable through at least 2035, but Dominion argued its duty was to shareholders, and that it had an obligation to shut down the plant if it could get a better return on its investment elsewhere.

“Based on the information that we had of other plants that had closed down that were in a similar position, I do believe Millstone would have shut down without the power procurement agreement with Dominion,” said State Sen. Cathy Osten

“This is a Connecticut asset — $1.5 billion in economic activity to the state of Connecticut,” Formica said. “We have 1,500 well-paying jobs, mostly in East Lyme, Waterford, Montville, New London, Old Lyme, Saybrook… imagine what happens to the economy without that?”

ISO-New England, which manages the regional grid, determined the closure of Millstone would put the region at risk of rolling blackouts, and carbon dioxide emissions from New England electric production would increase 25 percent. It would cost $1.8 billion to replace just a quarter of the zero carbon energy Millstone produces and $5.5 billion to replace all of it, according to PURA.

“It seems a small price to pay to be able to have energy available when we turn on the lights or plug in the vacuum,” Formica said.

“This is a Connecticut asset — $1.5 billion in economic activity to the state of Connecticut,” Formica said. “We have 1,500 well-paying jobs, mostly in East Lyme, Waterford, Montville, New London, Old Lyme, Saybrook. Imagine what happens to the economy without that?”

Contacted by phone, Marx agreed that those 1,500 jobs needed to be saved, and that Millstone is necessary until there are other sources of power available. What she has a hard time getting past, she said, is the fact that Dominion refused to open its books to lawmakers or regulators, especially given the estimates that Millstone was profitable, she said..

“I probably would have called their bluff that they were gonna close down,” Marx said. “And that’s a big thing to say years after it got passed and when I wasn’t sitting at any of the tables, but I have a hard time with the corporation saying, ‘I’m going to close down if you don’t get this for me.’”

Companies that own nuclear generators have made similar threats in Illinois, Ohio, New York and New Jersey in order to secure some version of zero emission credits – another form of ratepayer subsidy, said Todd Snitchler, President and CEO of the Electric Power Supply Association. 

“I probably would have called their bluff that they were gonna close down,” Marx said. “And that’s a big thing to say years after it got passed and when I wasn’t sitting at any of the tables, but I have a hard time with the corporation saying, ‘I’m going to close down if you don’t get this for me.’”

Most recently, Exelon announced in late August that it plans to close two nuclear plants in Illinois well before their licenses expire, after Illinois Gov. J.B. Pritzker rejected a plan to subsidize the plants, which Exelon says are not profitable. 

Exelon has made the same threat over two other Illinois nuclear plants, and secured a $235 million annual credit from the Illinois legislature in 2016. Those plants remain in operation with the annual subsidy. Like power purchase agreements, those credits are passed on to ratepayers, Snitchler said.

Subsidizing New England

Marx said she doesn’t think it’s a bad thing that Millstone got the subsidy, but she’s concerned with how it played out in the legislature. According to Marx, lawmakers voted without understanding what the effect would be on ratepayers, and the power purchase agreement left Connecticut ratepayers to support Millstone for the benefit of the entire region.

“What I would have done differently is insisted that we know how it would have impacted the ratepayers, and I would have tried to negotiate a better deal where it would have been the region and not just Connecticut paying for it,” Marx said.

While all of New England benefits from the plant, the power purchase agreements with Eversource and United Illuminating leave Connecticut ratepayers to cover the cost of subsidizing it on their own.

“Even though Millstone is located in Connecticut, no power plant in Connecticut is [just] a Connecticut asset. It’s a regional asset,” said State Sen. Norm Needleman, D-Essex, who wasn’t in the legislature when it paved the way for the Millstone deal, but now chairs the energy committee. “The 2,100 megawatts of power in eastern Connecticut doesn’t only serve the ratepayers of Connecticut, it serves the ratepayers of ISO New England.” 

Dykes argued to lawmakers during an Aug. 27 hearing of the Energy and Technology Committee the Millstone deal was a result of deregulation and ISO-New England policies that favor cheap natural gas, then force ratepayers to subsidize special contracts needed to ensure reliability. 

During the late 1990s, Connecticut directed United Illuminating and Connecticut Power and Light to sell off their power generating facilities and instead purchase power through a regional wholesale market run by ISO-New England.

Dykes said the reason New England would be at risk of rolling winter blackouts without Millstone is that the regional grid is too reliant on natural gas, which is a result of the market favoring natural gas, and ISO-New England blocking state-supported renewables from participating in the forward capacity market unless they coordinated the exit of an existing resource.

The issue of Connecticut ratepayers subsidizing Millstone for the benefit of the region came up repeatedly in discussions, said Dykes, who was the PURA chair at the time.

DEEP and PURA pushed ISO-New England to come up with a framework to spread those costs out, but the best they could come up with was a two year contract that would have Millstone shut down at the end, Dykes said.

“If ISO had done that as opposed to just Connecticut, then all the ratepayers in the region would be helping to keep that plant open, not just the ratepayers of Connecticut,” Needleman said. “But ISO will tell you they weren’t asked.” 

Osten said it was risky to ask the ISO to intervene at the time because Dominion could have stopped the negotiations and shut down Millstone. She said lawmakers understood ISO was not interested in negotiating with Dominion.

Marx said lawmakers and regulators needed to get ISO to the table to negotiate. She pointed to her experience negotiating union contracts, but admitted she didn’t know how different the process would be to negotiate for a nuclear power plant to remain open.

“The ratepayers weren’t protected. We weren’t protected from the impacts of the purchase agreements, and we were not protected in that only Connecticut was affected,” Marx said. “If those other people didn’t want to play ball, you have to make them play ball.”


Cate Hewitt contributed to the reporting of this news story