The Register Citizen (Torrington, CT)
Millstone and the $1B question
Why would the Millstone nuclear power plant pay nearly $1 billion to forgo the next five years of projected profitability?
The short answer is that it would not make economic sense to do so, based on publicly available information.
Energyzt Advisors LLC recently produced new research recognizing that although Millstone is committed to remain operational through May 2022, it could exit those commitments if it bought out of what are called “capacity supply obligations” — commitments that the plant has made to the regional grid operator to be available for service.
Any decision to retire Millstone before 2022, therefore, becomes an economic decision by the plant’s corporate owner, Dominion Energy Inc. which, no doubt, will consider the costs to shut down Millstone against the benefits of keeping it operating. Energyzt’s report estimates that it would cost Millstone about $680 million to exit its existing capacity obligations through May 2021. When other buyout costs are factored in, potential penalties could approach $1 billion. For comparison, Dominion paid $1.3 billion for Millstone in 2001.
This new research builds on prior findings that show Millstone has been and is projected to be profitable if it were to continue to operate. In April, Energyzt issued a separate report assessing the financial condition of Millstone. Comparing historical and future revenues to best estimates of costs, the financial assessment concluded that the plant has earned an estimated $3 billion in profits since 2001, while creating average annual returns to equity above 25 percent.
Millstone’s projected after-tax income for the next five years is more than enough to cover Millstone’s projected costs. The report also noted that Millstone was committed to remain operational in ISO-NE markets through May 2022 as a result of agreements with the New England electric grid operator.
These findings are not controversial. Third-party reports confirm that Millstone is profitable and will remain so for years to come. A study earlier this year by MIT’s Center for Energy and Environmental Policy Research that found that Millstone will be the most profitable nuclear plant in the United States through 2019. A New England States Committee on Electricity (NESCOE) report from the spring showed that “under every hypothetical scenario,” New England’s nuclear units, including Millstone, will remain profitable through 2030. Millstone’s commitments to remain operational are public; the costs to buy out of these commitments can be estimated based on published parameters.
As General Assembly may vote on legislative intervention for Millstone this week, it is worth noting that the state has yet to complete its own inquiry into the financial position of the plant. In July, Gov. Dannel P. Malloy issued an executive order directing a review of Millstone’s financial viability. The Department of Energy and Environmental Protection and the Public Utilities Regulatory Authority currently are assessing Millstone’s economic and operating performance; their findings are due early next year.
In the meantime, projected profitability from Millstone’s continued operations and steep costs to pursue early retirement begs the question of why out-ofmarket support is needed.