10.11.17: Amid New Data, Dominion’s Closure Threats Face The $1 Billion Question

For Immediate Release: October 11, 2017




Hartford, CT -- The Stop the Millstone Payout coalition, a group composed of competitive energy companies NRG, Calpine and Dynegy and the Electric Power Supply Association (EPSA), today released a new report that raises serious questions about the credibility of the Millstone Nuclear Plant’s threat to close its doors.  

The analysis, performed by global energy research firm Energyzt Advisors, details the financial penalties that Millstone would incur to prematurely exit its obligations to the wholesale electric market. Under ISO-New England rules, Millstone is currently obligated to provide capacity to the region through May 2021 and would have to pay to break those commitments.

The report concludes that if Millstone were to close today, those penalties would amount to at least $680 million – and would be closer to $1 billion once other market obligations are factored in.

“There is simply no way that Dominion is going to unnecessarily fork over $1 billion to close the most profitable nuclear plant in the United States,” said coalition spokesperson Matt Fossen, spokesman for the Stop the Millstone Payout coalition. “To put things in perspective, those penalties alone would cost nearly as much as Dominion paid for Millstone in the first place.”

Fossen added: “If the facts were on their side, Millstone would be working with the state to find a solution. Instead, they’re making empty threats that basic math says they will never execute. Connecticut lawmakers need to understand that propping up Millstone now will only hurt ratepayers and give a windfall payout to a company that cannot demonstrate any economic need.”

To reach their conclusions, Energyzt’s researchers examined the ISO-NE regulatory process, with a focus on what are called “Forward Capacity Auctions,” or FCAs. Under the rules of that system, power plants agree to make their services available to ISO-New England in exchange for payments. Capacity auctions are held 40 months in advance, which means obligations are locked in more than three years ahead of time. ISO-New England sets severe financial penalties for breaking these obligations.

As the analysis states:

“Simply removing Millstone from the capacity supply curve results in an incremental buy-out charge that exceeds the FCA payments Millstone currently is set to receive.  The resulting cost to Dominion is estimated to be between $200 million and $250 million per capacity commitment period, for a total cost of approximately $680 million for Millstone to extinguish its existing capacity obligations, which would be required in order for the units to retire prior to the scheduled end of its obligations through 2021.  

"In addition, given Millstone’s failure to submit a notification to withdraw its capacity from the upcoming auction for the 2021-2022 period, Dominion would incur additional costs to buy out of its obligation for that year. Including a buy-out of the current commitment to bid in FCA12, total costs to shed its capacity obligations to ISO-NE could approach $1 billion …”

For comparison purposes, it is worth noting that Dominion purchased the Millstone Nuclear Plant for $1.3 billion in the year 2000.

This new analysis further erodes any remaining credibility of Millstone’s claims of financial distress. In an earlier report this spring, Energyzt estimated the cost of a legislative plan to subsidize Millstone would cost ratepayers $330 million per year, translating into a 15% to 20% increase in supply costs. A study by MIT’s Center for Energy and Environmental Policy Research furthermore found that Millstone will be the most profitable nuclear plant in the United States through 2019, while a New England States Committee on Electricity report showed that “under every hypothetical scenario,” New England’s nuclear units, including Millstone, will remain profitable through 2030.