When Dominion won a bid for zero-carbon energy in December, it seemed like the perfect Christmas gift, a long-awaited lifeline that would keep its Millstone nuclear plant in Connecticut afloat.
Maybe not. New England’s biggest power plant might be forced to close after all. The company is racing to negotiate contracts with two major utilities by March 15. If a deal can’t be reached, Dominion executives say they will retire Millstone for good a few years from now.
The Virginia energy firm had previously threatened to pull the plug on the plant, saying it no longer made economic sense to run the two Millstone reactors. Those threats, in fact, were a big reason why Millstone was allowed to participate in Connecticut’s auction for carbon-free energy contracts.
The consequences of a closure would be felt well beyond Millstone’s hometown of Waterford, Conn., and its 1,500 or so employees. Dominion says it plays an important role in helping the state curb carbon emissions, without requiring an expensive new project to be built. Millstone is also a key component in New England’s electricity grid, and its uncertain outlook was a hot topic of discussion among the region’s governors when they met in Washington, D.C., last month.
Connecticut’s Department of Energy and Environmental Protection had chosen a 10-year bid for zero-carbon power from Dominion, equaling roughly half of Millstone’s output, on Dec. 28. The problem with this lifeline? The actual electricity prices still needed to be negotiated with utilities Eversource and Avangrid.
Paul Koonce, chief executive of Dominion’s power generation group, says Dominion has not yet had a face-to-face meeting with representatives from either utility. (Negotiations have been by phone so far.) The first such meeting is scheduled to take place later this week. Grid operator ISO New England’s March 15 deadline for retirement decisions is just around the corner. It’s easy to understand why Koonce might be worried.
With no price parameters provided by Connecticut regulators, Koonce says the utilities have little incentive to reach a deal.
But it’s not as if Millstone would close overnight. Dominion has already agreed with ISO New England to run the plant for the next three years. A closure could take place in 2023, once those commitments expire. However, Koonce says Dominion might buy out those contracts and retire the plant earlier, if it makes financial sense to do so. The emergence of cheap shale gas in the past decade has made it harder for nuclear to compete. Competitive pressures prompted Entergy to shut its Vermont Yankee nuke, and its Pilgrim reactor in Plymouth goes offline this spring.
ISO New England just dealt with a similar closing threat, after Exelon proposed shutting down its Mystic power plant in Everett. (Mystic actually exceeds Millstone’s capacity in the winter months, according to ISO New England.)
The grid operator couldn’t risk losing Mystic’s liquefied gas-fueled turbines, at least not when Exelon wanted to close.
Eventually, a deal was struck. Exelon could reap up to $200 million in payments from New England ratepayers annually, over a two-year period that ends in June 2024.
The wave of plant closures has prompted ISO New England to rethink the way it handles the electricity markets here — again.
A spokesman for the grid overseer says the organization is working on “market enhancements” that would take effect in 2024, along with interim compensation rules to help power plants in the meantime.
While it can’t forcibly block a retirement, ISO New England could initially rebuff the request, setting the stage for a sweet offer to stick around, like what happened with Mystic. That would mean Millstone’s costs would be shouldered by the entire six-state region, although Dominion says it has no interest in a Mystic-style deal. If Dominion reaches an accord with the utilities by March 15, those extra expenses might be limited to Connecticut. Either way, ratepayers would pay. Keeping the lights on doesn’t come cheap.