Lawmakers Start to Hash Out Granting Nuclear Subsidies to PSEG

Tom Johnson | December 5, 2017 | Energy & Environment
There’s been some suggestion a bill will be dealt with in lame-duck session, but right now there’s almost no real information to go on

Salem nuclear power plant
Lawmakers yesterday began focusing on whether to give subsidies to New Jersey’s three nuclear power plants — a dilemma they are trying to resolve without knowing what it will cost or even if the facilities are in financial distress.

In a significant issue with implications for future energy policy in the state, two legislative committees heard Ralph Izzo, the CEO of Public Service Enterprise Group, the owner of the units, say it would be cheaper for ratepayers to pay to keep the plants open than to shutter them.

Challenged by cheap natural gas

Nuclear power is facing big economic challenges as cheap natural gas has made it difficult to compete in a volatile energy marketplace. The issue is being debated nationwide; six nuclear power plants have prematurely closed in the past few years because of economics.

Izzo once again threatened to close the units if the state does not intervene to provide the plants with a “safety net,’’ but just what that would entail was left unsaid. Neither Izzo nor legislators offered any specifics of what a bill to prop up the plants would involve, much to the dismay of those who packed a three-hour hearing in the Statehouse Annex.

Nevertheless, Sen. Bob Smith, a Democrat and chairman of the Senate Environment and Energy Committee, refused to rule out such a bill passing in the lame-duck session, which ends early in January.

“It is possible,’’ said Smith, who is likely to shepherd such a bill through the Legislature. “I learned enough today to begin the discussion.’’

Unlikely allies

The prospect dismayed opponents, an unusual coalition of competing energy companies, consumer advocates, business lobbyists, and environmentalists. They argued that PSEG has failed to demonstrate a need for financial aid; the move would disrupt competition in the energy marketplace; and the issue is way too complex to be fast-tracked in only a month’s time.

“It creates one winner and many losers, including my company,’’ said Ray Long, a vice president of Princeton-based NRG Energy, one of the nation’s largest independent power suppliers.

With no bill yet to be made public, it is impossible to project what the subsidies — expected to be similar to incentives given nuclear units in Illinois and New York — will cost. Some foes tried anyway, estimating the cost could run as much as $3 billion over a decade.

Anybody who applies for a car loan has to provide more information than PSEG has provided in making its case for a subsidy, argued Steven Goldenberg, an attorney representing large energy users. “We think we know what they’re asking for — they’re asking for a lot of money,’’ he said.

Three-pronged approach

PSEG did not address the issue, but Izzo outlined a three-pronged approach that would protect consumers if subsidies were awarded. Before any incentives are granted, the company would have to open its books to the New Jersey Board of Public Utilities, he said. The subsidies also would be revisited to see if they were still necessary every three years.

Finally, if the federal government or PJM Interconnection provide incentives to nuclear units, as is now under consideration, they would be used to offset any state contributions, according to Izzo.

Given the proposal pending at those levels, opponents argued there is no rush for the state to act now. Others suggested Gov.-elect Phil Murphy’s push to rejoin RGGI (Regional Greenhouse Gas Initiative) will end up helping PSEG’s nuclear units by making them more competitive with plants that emit fossil fuels.

“Is there an issue for nuclear power plants?’’ asked Joseph Bowring, the independent market monitor for PJM, who assesses the competitiveness of the nation’s largest competitive energy market. “The answer is no.’’

PSEG, however, had diverse support for ensuring the plants stay open, including from former Gov. Jim Florio. “Allowing our nuclear plants to close would be an enormous step backwards in combatting climate change,’’ Florio said.

If the nuclear power plants remain open over the next decade, the Brattle Group projected it would cost consumers an additional $400 million a year to replace that power and prevent 14 million metric tons of carbon dioxide emissions, according to Brattle’s Dean Murphy.

The silent treatment

The proposal also won backing from the New Jersey State Chamber of Commerce, labor, and others who spoke following PSEG’s Izzo. The hearing ended without many opponents having an opportunity to talk, a move that especially irked environmental groups.

“Shameful,’’ shouted Jeff Tittel, director of the New Jersey Sierra Club, complaining about not being given an opportunity to speak. He called the subsidies unneeded, as well as undermining efforts to transition to cleaner energy, such as renewables.

Rate Counsel Director Stefanie Brand agreed, saying if the state is spending money for “already profitable nuclear plants, then there is not going to be any money’’ for clean energy.