The state is seeking to intervene in a case before a federal agency in which two subsidiaries of Public Service Enterprise Group are trying to recover more than $60 million. The money was funneled into upgrades to an old power plant that is needed to maintain the reliability of the electric power grid.
In a filing with the Federal Energy Regulatory Commission (FERC), PSEG Energy Resources and Trade and PSEG Fossil are seeking to recover costs associated with maintaining the 56-year-old Hudson Unit 1 generating station in Jersey City.
The gas-fired power plant has an installed capacity of 355 megawatts but has been downgraded to about 270 megawatts. It is a so-called peaking plant, which runs only a few times each summer, generally during extended heat waves when peak demand nears record levels. When that point is reached, PJM Interconnection, the independent operator of the regional power grid, calls on all power plants to come on line to keep the lights on.
The Newark company had been planning to retire the facility, but PJM directed it be kept open for reliability purposes until September 2012. Since the grid operator has extended the life of the power plant on several occasions, PSEG Fossil submitted projected plant improvements that would be needed to keep the plant operating safely until 2014.
In urging intervention in the case, Andrew Dembia, an attorney for the New Jersey Board of Public Utilities (BPU), argued the agency should oppose plans by the company to defer $3.4 million in planned improvements from 2010 to 2011. He also said the projected $64 million in upgrades should not be part of the federal case.
In an affidavit from Kenneth Daledda, director of engineering for PSEG Fossil, the company argued while significant improvements have been made to the generating facility, more are need to ensure "ongoing safe and reliable" operations of the unit.
“The risk of a catastrophic failure has been reduced; however, there still remains a level of risk that Hudson 1 might suffer a forced outage when required for reliability purposes,’’ Daledda said in the affidavit.
The issue is important to consumers because so-called peaking plants drive up the cost of electricity tremendously on very hot summer days. Since they typically are much more expensive to run, they are rarely called into service, but when they are, they set the price of electricity for all the power plants, which previously have come on line, including nuclear power facilities, which produce power at a fraction of the cost of peaking plants.
Since New Jersey and others states have deregulated the energy industry, few so-called base load power plants have been built, with companies relying on peaking plants to keep the power grid reliable.