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BPU Plans Hearings on New Power Plants

The Christie administration wants a say in how new generation plants are attracted to New Jersey.

No matter what happens in the state legislature, the Christie administration plans to hold its own hearings on how New Jersey should attract new power plants.

The New Jersey Board of Public Utilities (BPU) President Lee Solomon said his agency will begin stakeholder hearings early this year to address how to lure new generation plants to the state, even if a controversial bill pending in the legislature is approved.

The issue is a priority both for lawmakers and for the administration because New Jersey suffers from some of the highest energy bills in the nation. This dubious distinction is caused, in part, by a congested power grid and, in part, by the failure of the state to build large power plants since it broke up its gas and electric monopolies more than a decade ago.

Building Baseload Plants

While some argue the state can meet future demand by developing cleaner sources of electricity and reducing energy consumption, many in the business community have pushed policymakers to take steps to convince power suppliers to build new so-called baseload plants, generating stations that run most of the time, to lower electric costs.

How to do so is the dilemma.

In a bill pushed by Democrats, ratepayers would guarantee payments to a developer over a 15-year period to help line up the financing to get a plant built, a step that proponents argue would lower electric bills by an amount much greater than the subsidy. Critics deride the measure as a sweetheart deal for one developer since, as it is currently drafted, it would apply to only plants providing new capacity totaling 1,000 megawatts. One megawatt is enough to power about 800 homes.

The Christie administration has not publicly taken a stance on the bill, but legislative sources say officials have told legislators the Governor will veto any bill unless it provides at least 2,000 megawatts of capacity.

A $2 Billion Burden

A big factor in the rise in electric bills is a new charge imposed on customers’ bills by PJM Interconnection, the operator of the regional power grid, to incent developers to build new plants. The charge, however, has been especially onerous to New Jersey ratepayers, who, Solomon noted in a letter, pay as much as $1.1 billion and $1.9 billion.

"In the near future, these costs will rise substantially due to the reluctance of incumbent generators to make long-term investments in new in-state generation and delays in the federal permitting of the Susquehanna-Roseland power line project," Solomon wrote to the PJM Market Monitor. The project is a controversial transmission line that would deliver power into New Jersey from the west through the heart of the New Jersey Highlands.

"The New Jersey BPU believes that action must be taken to reduce the burden of high energy costs on ratepayers, and to reduce the State’s reliance on environmentally undesirable out-of-state generation," Solomon wrote, promising an open and transparent process to lure new power plants here.

His stance won praise from business interests, which have been pushing the state to develop new power plants.

The BPU In Control

"The board ultimately needs to have control of this issue. It shouldn’t be left up to the legislature to determine the winners and losers," said Steve Goldenberg, an attorney who represents manufacturers who use large amounts of energy. "These are the people with the expertise to understand the consequences of their decisions."

Paul Patterson, an energy analyst with Glenrock Associates in New York, said it is usually the regulatory agencies in states that take the lead in trying to promote new power supplies. "The details of what generation should be built and where it should be located would be delegated to a regulatory agency with the expertise to decide those issues," he said.

For instance, in Maryland, the Public Service Commission, that state’s regulatory agency, recently issued a draft Request for Proposal soliciting bids from developers to build new generation there. Like New Jersey, Maryland officials are unhappy with the costs consumers there are bearing under the surcharge imposed by PJM.

Not everyone wants the state to encourage new power plant construction, however. Jeff Titttel, executive director of the New Jersey Sierra Club, said if the state invests resources into building new generation, it will take away capital from wind and solar projects, as well as energy efficiency programs.

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