The Business of Energy
Building Balanced Generation
Dominion Resources
By Lisa Schroder, Markets Editor
Daniel Weekley, managing director of Northeast Government
Affairs for Dominion.Electricity cannot be stored—that means every time a light switch comes on a generating unit is ready to operate or is online someplace.
Millstone Power Station (Waterford, Conn.) is the largest single generating facility in the state and in New England. It boasts a talented, specialized workforce of about 1,200 full-time employees, a large portion from military backgrounds—nuclear navy, aircraft carriers, or submarines—as well as technical, IT, and engineering fields.
Since purchasing Millstone in 2001 for $1.3 billion, Dominion Resources has invested about $300 million in improvements in the station, making it about 30 percent more reliable today than it was 10 years ago. Millstone is the ‘price moderator’ for our region, says Dominion’s Dan Weekley, managing director, northeast government affairs. Every time that the Millstone units are offline, the price of power increases significantly in Connecticut as well as across New England. The units are taken offline for maintenance refueling every 18 months, typically for 30 to 33 days. According to Weekley, it’s a huge economic boom to the region that brings in about 1,100 supplemental employees for that period.
The perception of nuclear power in Connecticut is overwhelmingly positive, says Weekley, admitting that there are a handful of detractors out there. “I think what’s going on with the legislature in Connecticut has brought this to a head: People look at what’s happening to energy costs in New England, but they’re also looking at what’s happening to our fuel mix here. Forty-five to 50 percent in all of New England is now natural gas because of our environmental regulations here.” While natural gas units are great, they are very expensive to operate, he says. “They are not price moderators.”
OVERALL - NOT OVERHAUL - POLICY
“People are saying we have got to diversify our generation fleet, and why aren’t we building more nuclear?” The answer to that is simple, says Weekley, insisting that he means no disrespect to the politicians or the regulators: “Connecticut can’t seem to decide what its course is going to be. We continue to change our complete direction on energy policy every two to three years.” Building a nuclear unit requires six to seven years of construction and years of permitting before that, he says. “We can’t change our energy policy every two or three years and think people are going to come in and invest several billion dollars. Would we ever consider building another nuclear plant in the state of Connecticut? Probably not.”
Dominion has testified before the legislature in Hartford several times over the past couple years. While “very supportive of all the ideas that they come up with regarding conservation and resource planning,” Weekley acknowledges that there are problems as well. “We think that the way the utilities are required to buy their supply today is not getting the best price for the consumers.”
There are three types of generation stations, he explains: Base load, which operate 365 days, regardless of what the market is; intermediate units that run in moderate temperatures; and peak stations, which operate less than 5 percent of the time, only when demand is super high. Those three types of stations are known as “full service,” and “utilities have to go out and buy that as a block,” he says. “Any person that wants to bid on that request for proposal has to provide all three. Our point is, that doesn’t make any sense. Why would you not allow the utilities to contract directly with the generator?”
Overall, Dominion’s message has been: Tweak the market. Make the small changes, but quit trying to overhaul the energy policy every two to three years. “First thing, you’ve got to have stability,” says Weekley. “Get to a policy and stick with it. Don’t do anything foolish that pushes people away. That’s what most of the leaders recognize.”
So again, think about this: Electricity cannot be stored—that means every time a light switch comes on a generating unit is ready to operate or is online someplace. The issue was, those generators had to be ready to run but weren’t getting paid. “DPUC and the legislature here in Connecticut did a very good Energy Independence Act in 2000, but here we go in 2006 and 2007, people were looking to repeal it; it wasn’t even started yet!” he says. “That’s the stability part that’s just not here.”
A GENERATION OF DIVERSITY
“In two to three years will prices be lower and will we be more competitive with the rest of the country? I think so,” he says. “Do I think rates are going to come down as a whole? I certainly hope so. I think so, because I think we’re being penalized right now…but the one unknown out there is natural gas. We have got to diversify our generation fleet.” Back in 1999 and 2000, Connecticut and New England were about 15 percent natural gas; today it’s 45 to 50 percent. When deregulation was done, natural gas cost between $2.50 and $2.75 per million cubic feet. Today it’s averaging $10, and it’s spiked as high as $17 this winter—and that’s just for fuel. (Fuel on a natural gas unit is 85 percent of the cost.)
While he agrees that renewables are a very positive thing, he points out that they are not all that cost-effective. Another consideration is the capacity factor—how much the plants are running. Millstone has a capacity factor of about 92 to 93 percent. Wind, solar, and others have a typical capacity factor of 25 to 30 percent. We cannot solely depend on that.
“Our mantra is you’ve got to diversify your generation fleet and you’ve got to build transmission here. Absolutely have to do it,” says Weekley, comparing it to a stock portfolio: You don’t put all your eggs in one basket. “Even though nuclear is by far one of the safest and most reliable sources of electricity, I would tell you that having exclusively nuclear would not be a good thing—you have got to have that balance, and balance does include natural gas, nuclear, coal…and ultraclean oil as well.”
And how safe is Millstone today? From an operational and safety standpoint, Weekley says personally he has no worries whatsoever. “How many other businesses can tell you that their full-time regulator has full-time staff people at [their] site all day, every day, and has the right to sit in on any meetings that they want to,” he says, adding that the state Department of Environmental Protection has full-time offices at the facility as well. “So we have basically our federal regulator and our state regulator among our employees at our facility all day, every day. That’s a normal part of our business, and we think that’s a good thing.”
