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Dominion pleased with final RFP for Connecticut power procurement

New York β€” Dominion Energy is pleased a request for proposals issued by Connecticut utility regulators for power to the state's utilities will allow the company's Millstone nuclear plant to bid as a generating asset "at risk" of early closure beginning in 2022, CEO Thomas Farrell said Wednesday.

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Legislation passed by the Connecticut State Assembly in October cleared the way for Dominion to bid Millstone for such contracts. The company said the legislation was needed because Millstone was economically challenged and at risk of early closure, and the plant should be allowed to bid in the same category as renewables such as solar and wind because nuclear power has environmental benefits, such as not emitting carbon, that should be compensated.

Connecticut regulators approved February 1 a plan that would allow the company to sell most of Millstone 's output to state utilities for resale in wholesale power markets. The generation of Millstone -2 and -3, with a combined capacity of 2,194 MW, is currently sold under long-term arrangements to financial institutions such as hedge funds.

Under the procurement process, an existing generating resource cannot be credited for its zero-carbon and other environmental attributes unless it is designated by state regulators as being at risk of early closure. With such a designation, a resource can be credited for such attributes and gain competitive advantages in the procurement process. Dominion petitioned state regulators in May requesting that Millstone be so designated.

The state's Department of Energy and Environmental Protection, or DEEP, and its Public Utilities Regulatory Authority, PURA, issued June 22 for comment a draft request for proposals, or RFP, that would not have allowed Dominion to bid Millstone as an "existing asset at risk" of early closure until an "at risk time period" beginning in June 2023. The company objected that Millstone needed to be able to bid earlier than that because large investments would need to be made if its reactors were to continue to operate.

On Tuesday, DEEP issued the final version of the RFP, in which the "at risk time period" was set to begin in June 2022, unless a bidder demonstrates to the regulator that the period should begin earlier than that.

During Dominion's second-quarter earnings call for analysts Wednesday, Farrell said that the company is "pleased that DEEP modified the 'at risk time period.' By doing so, DEEP acknowledged that an existing resource that is determined to be 'at risk' should have all its attributes valued now."

Farrell said, "We expect Millstone to be granted 'at risk' status, which means its bids will be judged on price and non-price attributes such as carbon, economic impact and fuel security."

Bids are due September 14, "and DEEP is expected to select winners by the end of the year," Farrell said. "Winning bidders will execute contracts with the local electric distributions companies thereafter, and receive final PURA approval early next year."

Some consumer groups and fossil-fuel companies opposed the legislation and have objected to designating Millstone as an at-risk resource, pointing to an independent economic assessment conducted for regulators and issued in November that determined the plant is operating profitably and is expected to do so for several years.

NRG spokesman David Gaier said in a statement Tuesday: "The Millstone plant is clearly not 'at risk' certainly before June 1, 2022 -- in fact, the plant has a capacity obligation through May 2023 with no hint of retirement. So once again, for Millstone to plead poverty is simply not credible."

The Electric Power Supply Association said in its July 20 comments on the draft RFP that "while EPSA opposes market-distorting subsidies of all stripes, DEEP and PURA should not consider awarding additional ratepayer dollars to Millstone -- or any other generator -- until they have provided plant-level, independently audited financial statements. To date, Dominion attempted to play a shell game with both legislators and regulators, invoking dire rhetoric and scare tactics at every turn, without providing credible evidence to support its assertions."

The association added, "With ratepayer subsidies valued in the hundreds of millions of dollars on the line to be paid solely by Connecticut consumers, a fully transparent, stakeholder-driven process is critical."

As part of the petition process, Dominion has submitted to regulators confidential financial information on Millstone, and company officials have said that information is comprehensive and responsive to the regulators' needs in the review of the petition.

-- Steven Dolley, steven.dolley@spglobal.com

-- Edited by Richard Rubin, newsdesk@spglobal.com