Dominion Energy Inc. warned Connecticut regulators that its Millstone nuclear plant is in immediate danger of early closure and cannot wait five years to compete for a power supply contract that would compensate the facility at above-market prices for its environmental attributes.

The warning came in response to June 22 draft request for proposals by the Connecticut Department of Energy and Environmental Protection, or DEEP, which said the nuclear facility in Waterford, Conn., and other zero-carbon energy sources "can only be deemed at risk," and thus eligible to compete for the contract, during an "at risk time period" starting June 2023. (Connecticut Public Utilities Regulatory Authority Docket No. 18-05-04)

"Millstone is at risk now," Paul Koonce, president and CEO of Dominion's Power Generation Group, wrote with underlined emphasis to DEEP in a July 2 letter. "And Dominion Energy must face critical business decisions regarding the future of Millstone, irrespective of the consequences those decisions might have on Connecticut or the New England region."

Koonce said Dominion has deferred making decisions for three years, in good faith and while waiting for the legislative process, not because of the economics of the ISO New England market.

The Dominion executive stressed that Gov. Dannel Malloy and state lawmakers did not envision delaying for five years any consideration of helping keep Millstone online when they enacted legislation in October 2017 to do just that. The statute authorized DEEP and the Public Utilities Regulatory Authority to allow Millstone and other zero-carbon energy resources to compete for and be awarded a subsidy agreement if deemed to be in the public’s interest.

Dominion requested DEEP amend the draft RFP to remove the "at risk time period" and explicitly allow "Existing Resources Confirmed at Risk" — Millstone is currently the only generating resource that has applied for that designation — to submit contracts with a start date as early as 2019 that take into consideration their economic and environmental benefits.

Like merchant nuclear generators across the U.S., an abundant supply of cheap natural gas has been curtailing Millstone's revenues by suppressing wholesale electricity market prices. The loss of the approximately 2,101-MW power plant would not only mean a loss of Connecticut's largest zero-carbon energy resource but numerous jobs and economic and grid reliability benefits, the company has warned.

"Precluding 'at risk' entities from proposing competitive contracts that take into consideration their environmental and other attributes until 2023 is unsupported by wholesale market economics," Koonce said, adding that Dominion is facing time constraints to decide whether to invest hundreds of millions of additional dollars to keep Millstone operating.

Dominion: Participation in capacity auctions misunderstood

Despite repeated past warnings, Koonce said DEEP misconstrued Millstone's committed participation in regional grid operator ISO-NE's forward capacity auctions, or FCAs, through 2022 as evidence of the plant's economic vitality. Instead, Millstone participated in the FCA 10, 11 and 12 and has signaled it will participate in FCA 13 for 2022-2023 capacity supply years in good faith as Dominion engaged with state officials in securing the plant's future, he said. Furthermore, he said the forward capacity market provides only a small portion of Millstone's total revenue, which comes predominately from the wholesale energy market.

Claire Coleman, an attorney with the Connecticut Fund for the Environment, said DEEP's decision to hold off on considering whether Millstone is at risk "makes perfect sense" as the plant failed to delist in time for the FCA 13 and, thus, will stay online through at least 2023. She added that forcing ratepayers to "bail out" Millstone when it will be committed to the regional market "makes no sense" given Connecticut's high electricity costs and need to invest in renewables and storage.

Before Dominion missed the March 2018 delist deadline for FCA 13, an October 2017 report by Energyzt Advisors LLC said Dominion would have little reason to retire Millstone before 2022 as it would cost the company up to $1 billion to buy out Millstone's capacity supply obligations.

A subsidiary of Dominion owns 100% of Millstone unit 2 and 93.47% of Millstone unit 3, which are licensed to operate through 2035 and 2045, respectively. The remaining portion of Millstone 3 is owned by Massachusetts Municipal Wholesale Electric Co. and Énergir LP's Green Mountain Power Corp.

DEEP spokesperson Chris Collibee said in a statement that the state agency will carefully review comments on the draft RFP before issuing the final RFP by July 31.