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New Generation Breaks Ground Just as NJ Reels in Aging Plants

LS Power pays its own way to begin building plant aimed at lowering what analysts say are the state’s sky-high electricity prices.

As Gov. Chris Christie yesterday celebrated the groundbreaking of a new power plant in New Jersey, the administration simultaneously ordered scores of other power plants to close down or make major upgrades to reduce air pollution.

The actions may undermine the primary aim of building a new 738-megawatt power plant in West Deptford, which aims to drive down steep prices residents and businesses pay to keep the lights on in their storefronts and homes, according to some energy analysts.

The decision not to extend a May deadline to allow nearly 5,000 megawatts of so-called peaking plants -- which are older, more polluting units -- to run during times of peak demand could trigger an increase in capacity prices for power plants, analysts said. Capacity prices assure there are enough generating stations on standby to meet electricity demand.

“A reduction of 5,000 megawatts, all things being equal, should substantially help push up capacity prices,’’ said Paul Patterson, an energy analyst at Glenrock Associates, which is based in New York.

That is precisely what the administration has been working feverishly to prevent by strongly encouraging the building of new power plants in the state. With new generation coming online, such as the LS Power Plant in Gloucester County, it could drive down sky-high electricity prices for consumers, according to administration officials.

Senate President Stephen Sweeney (D-Gloucester), a West Deptford resident and longtime advocate of the LS Power project, predicted the plant could reap up to $300 million in savings to ratepayers when it comes on line in 2014.

But neither, he, Christie nor other dignitaries who spoke at the event directly mentioned a highly controversial bill approved by lawmakers and signed by the governor, which would use ratepayers subsidies to build new power plants. Ironically, the bill was originally drafted with the goal of supporting the LS Power plant, but instead directed assistance to three other facilities.

Christie, in his remarks, vowed his administration would continue to press both the regional power grid and federal authorities to build new generation in the state, despite opposition from those quarters. “It’s good public policy,’’ he said at the event while snow billowed down outside the tent set up for the groundbreaking. “We pay too much for energy in this state.’’

At the event, LS Power’s Paul Segal, the company’s chief executive officer, said the company already has begun the permitting process to build another unit at the facility that would generate an additional 400 megawatts of capacity. One megawatt is enough to produce the power for 800 homes.

If that is the case, Patterson said the expansion indicates the developer “has more confidence in the economics of its project.’’ At one point, LS Power told lawmakers it could not build the facility without the ratepayer subsidies.

What this project’s going forward means for the three developers who have secured state assistance remains to be seen. A more important question revolves around what the state’s decision to require all peaking power plants to meet a 2015 deadline to reduce pollution, which causes ground-level ozone, or smog.

Some energy executives say it could push prices higher in annual capacity auctions each May, a result that could allow the state-sponsored three projects to clear -- despite tough conditions imposed by federal and the regional operator of the power grid, PJM Interconnection.

Christie administration officials defended the move to shut down the plants, saying it could improve air quality by an average of 5 tons to 20 tons per day by reducing nitrogen oxides, a main component in smog.

“We don’t think it is going to push up the price, and, if so, only minimally,’’ said Department of Environmental Protection Commissioner Bob Martin, referring to the closing of the plants. He argued the action is needed to help the state attain federal air quality standards for ground-level ozone, a standard New Jersey has never met.

Board of Public Utilities Commissioner Bob Hanna agreed. “We’re hopeful of seeing a number of [state-sponsored plants] clear in May.’’

The decision to not grant an extension to the peaking units falls most heavily on PSEG Power, which owns more than 60 units producing up to 2,900 megawatts of capacity. The generator has invested $20 million in recent years in making sure the plants can come on line when needed. The company declined to comment on the administration’s decision.

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