Well-crafted Millstone bill deserves support [The Day]

March 21, 2017

Editorial by The Day

Among the most contentious and complicated debates at the State Capitol this session is whether to change the way Millstone Power Station is allowed to sell the electricity it produces.

It’s a lot of electricity. The two nuclear reactors at Millstone meet about 55 percent of Connecticut’s power needs and roughly 15 percent of New England’s. To assure adequate energy supplies during periods of peak demand and avoid wild spikes in energy prices, it is critical to maintain the base load Millstone provides. Of added importance is that Millstone generates electricity without creating greenhouse emissions.

Millstone owner Dominion is making the case that current energy pricing policies in Connecticut’s deregulated market do not mesh with the nuclear model. That model is built on long-term consistent operation. Except for refueling outages or unexpected shutdowns, the reactors are humming 24-hours a day producing the steam that powers its electric-generating turbines.

The development of fracking technology has produced an abundance of natural gas and a growth in gas-powered electric generation plants. Nuclear and gas compete in the same energy marketplace, the electricity the plants intend to produce sold as a commodity to energy market middlemen. They make their money by using competition to drive down the buying price, then reselling at a profit to power suppliers.

The intent of the competition is to hold down prices, but it has not worked well, with Connecticut consumers paying among the highest electric rates in the nation.

Yet with increased competition from natural gas and stagnant energy demands, wholesale prices have dropped from $64.57 in megawatts per hour in 2014, to $41.90 in 2015, to $29 last year. Largely, the energy market middlemen and electric suppliers have benefitted, not consumers.

Millstone is seeking the security of long-term energy contracts to secure the viability of its nuclear energy model. Indeed, there have been several nuclear plant closings around the country in areas served by deregulated electric generation pricing systems similar to those used in Connecticut and New England.

Projections on what this would mean vary dramatically. If allowed to sell directly to power suppliers in long-term deals, and eliminate the hedge fund and Wall Street middlemen in the process, Millstone officials have testified they can reduce retail electric rates.

Opponents see things much differently. Special treatment for Millstone will reduce competition in the energy marketplace and drive up prices, warn natural gas generators. The American Association of Retired Persons holds the same view.

Meanwhile, renewable energy advocates — wind, solar, and fuel-cell technology — warn that if Millstone is able to compete in the same long-term contract market now open only to them, these technologies will be crowded out.

On pricing, it is difficult to know who is right. But in constructing legislation, the Energy and Technology Committee has done a good job of managing risks while giving the model proposed by Millstone a try, with Sen. Paul Formica, R-East Lyme, playing a key role as co-chair of the committee.

Under the bill, Millstone would be allowed to sell 950 megawatts a year directly to power distributors Eversource and United Illuminating, roughly half the electricity Millstone’s Waterford station generates. Pricing in the five-year contract would result from a state-run bid process.

The resulting deal, however, would also be contingent upon the Department of Energy and Environmental Protection, the Office of Consumer Counsel, and the attorney general verifying that it is in the best interest of ratepayers. Critics would have the chance to make their case against it.

Revised legislation would be necessary to extend the arrangement beyond the five years, by which time there will be a record as to how things worked.

As for renewables, the same bill allows renewable energy producers to negotiate 20-year deals to achieve 40 percent of electric power coming from renewables by 2040. The state cannot use Millstone power towards meeting that goal.

Connecticut needs a bridge to a future with more clean, renewable energy. Millstone, expected to end operations around the 2040s, can provide it. Senate Bill 106 offers a practical approach to helping assure the viability of the nuclear station in the meantime.