Archives

PUR Guide 2012 Fully Updated Version

Available NOW!

This comprehensive self-study certification course is designed to teach the novice or pro everything they need to understand and succeed in every phase of the public utilities business.

Order Now

New Connecticut Law Sets Stage for Adders

In contrast to the situation in Florida, which marked a distinct setback for nuclear interests, Connecticut appears to be viewing nuclear power in a more positive light, after Connecticut Governor Dannel P. Malloy this week signed into law a bill that would allow state regulators to alter the pricing rules applicable to generation produced by nuclear reactors. In crafting Senate Bill 1501, state lawmakers asserted that it was designed to permit nuclear facilities to compete more effectively in regional energy markets, given increasing reliance on electricity generated by less expensive natural gas-fired units.

More particularly, the statute was aimed at the Millstone nuclear station located in Waterford, Connecticut, which plant had been the subject of a July executive order from Malloy. The governor’s directive had tasked both the Connecticut Department of Energy and Environmental Protection (DEEP) and the Connecticut Public Utilities Regulatory Authority (PURA) with evaluating the present versus future economic viability of the Millstone plant vis-à-vis other energy resources.

Senate Bill 1501 was titled “An Act Concerning Zero Carbon Procurement,” and it was aimed at advancing clean energy technologies in the state so as to reduce greenhouse gas and other carbon emissions in Connecticut. To that end, the legislation explicitly recognized nuclear energy as just such a source of zero-emission production. However, the law also acknowledged that nuclear power does not always meet the definition of a least-cost source of generation.

Consequently, the General Assembly found it expedient to offer the nuclear industry some help in pricing so as to enable nuclear stations to participate in wholesale energy markets on a more level playing field. That is, lawmakers deemed it appropriate to place nuclear power on par with such other zero-emission technologies as solar, wind, and hydro, which often have been afforded adders to stimulate investments in such developments.

In that same vein, Senate Bill 1501 envisioned for Millstone the option of imposing an additional charge on electric ratepayers through which to help support ongoing nuclear generation. Importantly, though, while Senate Bill 1501 authorizes the PURA and others to consider such a mechanism (or other exceptions to normally applicable rate-making protocols), the legislation does not mandate such.

In a statement accompanying his signing of Senate Bill 1501, Governor Malloy hinted that he was not entirely convinced that the law was actually needed. He elaborated that in response to his July executive order, the PURA and DEEP had just submitted a summation of their preliminary findings on Millstone. He revealed that the PURA/DEEP report indicated that even if unfavorable market conditions are factored in, it seems likely that the nuclear plant will be financially viable for a number of years yet. More particularly, the governor averred that under the different cost models run by the agencies’ outside consultant, it was projected that Millstone would remain “highly profitable” through at least 2035.

According to the governor, the cost analyses showed that Millstone was likely to be “significantly in the black” to the tune of $1.2 billion for the period of 2022 to 2035. And, the governor said, that result was calculated even after accounting for lower-than-predicted natural gas prices and higher-than- expected capital, fuel, and operational expenses for Millstone. At the same time, though, Governor Malloy noted that the report’s authors had emphasized that Millstone apparently had been less than cooperative in providing the financial information necessary for doing a comprehensive cost study of its operations.

Pointing out that other states in New England had been able to collaborate with nuclear plant operators in a far more detailed manner when assessing the true value of nuclear power, Governor Malloy lamented that Connecticut had not secured “significantly more engagement” from Millstone’s owner. The governor therefore urged Millstone and its owner, Dominion Energy, to share more of its financial data with the PURA and DEEP. Citing the findings set forth in the PURA/DEEP report, the governor said that, as it now stands, there was no basis upon which to conclude at the current time that Millstone needs any type of pricing adder in order to assure its continuing profitability.

The governor conveyed his belief that in the absence of more documentation from Millstone as to poor financials, there was no reason for the underwriting tools provided for in Senate Bill 1501 to be invoked. Nevertheless, he added, in light of the importance of nuclear power to the state’s generation portfolio, and because the output from the Millstone facility represents such a significant portion of Connecticut’s overall electricity needs, he was signing the bill.

Governor Malloy cautioned, though, that he still harbored some misgivings. He remarked that for the goals set out in the legislation to be attained, there was a lot more work to be done, starting with obtaining more detailed economic data from Millstone and its owner.