Just two years after a state contract to buy power from the Millstone Nuclear Power Station in Waterford led to a surge in summer electric rates, that same contract is a major factor behind a significant drop in rates slated to take effect in September.
Adjusted rates that PURA approved last week are expected to save the average residential Eversource electric customer about $9.78 per month, and $7.72 a month for United Illuminating customers.
That cost savings is driven by the millions of dollars the electric companies saved by buying power from Millstone and the Seabrook Nuclear Power Plant at rates that are now below the market average in New England.
From January through June, Eversource benefited to the tune of $210 million, while the United Illuminating benefit totaled $46.3 million, from state’s contracts with Millstone and Seabrook, the companies told PURA.
Two years ago, with natural gas prices at historic lows, the $49.99 MWh price guaranteed for nuclear power led to a steep July 2020 rate hike. Forced to quickly rescind the 2020 rate hike in the face of public outrage, Eversource said customers were undercharged by $189 million that year, and customers of both utilities have been paying higher rates since to make up the balance.
Two years later, with the price of gas at historic highs, that rate is a relative bargain for the gas-dominated New England electric grid. And overcharges from 2021 and 2022 will pay off the balance customers were undercharged in 2020, and allow the utilities to lower rates – though Eversource said it expects customers will see another substantial increase to the supply rate in January as the price of gas spikes in the winter.
The see-saw in prices from 2020 to 2022 show how volatile the Millstone contract can be for Connecticut electric customer rates, but two new federal tax credits for nuclear production could offset the higher costs of buying power from Millstone in the future when market rates are low.
Both the $1 trillion infrastructure bill Congress approved last fall and the Inflation Reduction Act passed this month include new tax credits designed to backstop revenues for nuclear power plants, which have increasingly been shut down in the face of low market prices.
DEEP Commissioner Katie Dykes said that when Connecticut negotiated its 10-year contract to buy power from Millstone to prevent Dominion from closing the plant in 2017, it included a provision that any new revenue source would flow back to Connecticut electric customers – including tax credits.
Dykes said it was important that those credits would be directed toward electric customers and that the state wouldn’t miss out on the benefits of the new programs just because it acted earlier to keep Millstone open.
“It’s heartening that the federal government now is reflecting the same policies that Connecticut embraced in 2017, in recognizing that it’s going to be very, very difficult for us to meet our decarbonization goals affordably and reliably without retaining the baseload nuclear units that are providing emission-free power,” Dykes said.
United Illuminating told PURA that Dominion would apply for the Civil Nuclear Credit in 2023, so any revenues that would bring to the Millstone plant would offset potential costs the utilities take on from their contract with the plant if market prices fell.
Dominion CFO Jim Chapman told analysts on a quarterly earnings call this month that, while the details of the Nuclear Production Tax Credit in the Inflation Reduction Act still needed to be worked out, the new credits were “customer-friendly” as the benefits to Millstone would be passed on to the utilities and their customers.
“Long term, [it’s] good for the industry, good for the future of Millstone, whatever happens after that 10-year [power purchasing contract],” Chapman said.