A Connecticut state-commissioned study of Dominion Energy Inc.'s Millstone nuclear power plant found the facility is expected to remain profitable through 2035 without any out-of-market help.

While recognizing the 2,101-MW nuclear plant's emissions-free baseload generation is "vital to Connecticut's economy and carbon reduction goals," the preliminary report by Levitan & Associates Inc. concluded "there is no 'missing money' required to ensure Millstone's financial viability through the existing term of Millstone's Unit 2 operating license" in 2035. The operating license for Unit 3 expires in 2045.

Connecticut's Department of Energy and Environmental Protection, or DEEP, and the Public Utilities Regulatory Authority, or PURA, released the commissioned report Dec. 14 in response to Gov. Dannel Malloy's July 25 order to investigate "the current and projected economic viability" of keeping Millstone online.

Despite lingering questions over the finances of Millstone, Malloy signed legislation Oct. 31 to allow the plant to avoid a threatened early retirement by bidding for a long-term power supply contract that would shore up future revenues in a market awash with cheap natural gas. Levitan's conclusion, based on industry assumptions, appears to support the suspicions of critics and findings of previous studies that the nuclear facility in Waterford, Conn., is far from becoming uneconomic.

"Under expected market conditions, the present value of Millstone's after-tax cash flows from mid-2021 through mid-2035 is about $2.4 billion," Levitan wrote in the report. "Under lower than anticipated natural gas prices the present value declines to about $1.5 billion. Under low natural gas prices and higher than anticipated Millstone operating costs, the present value declines to $1.3 billion, but remains 'deep-in-the-black.'"

However, the report warned that if Dominion was required to replace its existing system with cooling towers as part of its renewal for its pollutant discharge elimination system permit, "it is likely that cash flow from energy and capacity sales would be insufficient to rationalize the investment."

As part of its study, Levitan ran detailed simulations of New England's wholesale electricity markets under several scenarios and derived reasonable proxies for proprietary cost data associated with Millstone's fuel costs, operations and maintenance costs, nonoperating expenses and capital expenditures.

"The report misses the mark in one area — Millstone's costs and revenues," Dominion spokesman Ken Holt said in an email. "However, DEEP and PURA readily acknowledged that error resulted from time constraints."

Holt added that the report's assumptions are based on a comparison with nuclear plants vastly different from Millstone in design, operating expenses and the local cost environment. "It is like deciding what to wear today in Hartford based on the weather forecast for Atlanta," he said.

Dominion had previously declined to hand over such proprietary information, but Holt said the company provided the state agencies in November "actual" confidential financial information about Millstone's costs and revenues and are working with DEEP and PURA so the information is incorporated into the final report due Feb. 1, 2018.

DEEP's and PURA's draft summary of the report did note "significant inherent difficulties" in determining the financial viability of a merchant nuclear plant in a restructured market. "Merchant generators' financial goals may exceed the regulated rate of return earned by cost-of-service generators, given merchant generators' exposure to the risks of low energy prices, unplanned outages, and other costs that a regulated generator can recover from electric ratepayers," the regulators said.

However, the regulators said Dominion only provided "a limited, two-page, high-level document with forward-looking financial projections." As a result, the regulators said the study was limited to using the best publicly available information.

Regardless, Holt said the report is clear that without Millstone, Connecticut would suffer "chronic reliability issues, up to and including blackouts, failing to meet the state's carbon reduction goals, loss of substantial jobs and economic benefits and higher costs for customers."

Levitan also estimated the possible effects on Connecticut's electric ratepayers and its economy if Millstone ceased operations.

If Millstone does shutter, the report considered new gas-fired capacity filling the void at a cost of about $700 million. Otherwise, Connecticut could mandate its electric distribution companies to compensate for the lost capacity by contracting for renewable energy and demand-side management resources at a cost of $1.8 billion to replace a quarter of Millstone's capacity or about $5.5 billion to replace Millstone entirely.

Comments in response to the study are due Jan. 8, 2018. The final report with recommendations from DEEP and PURA will be filed by Feb. 1, 2018.