Follow Us:

Energy & Environment

  • Article
  • Comments

FERC Says PSEG Subsidiary Made False Statements over 9-Year Period

Federal agency contends alleged violations occurred when company was bidding into power auction to set prices consumers pay for electricity

mercer county coal plant
Credit: PSEG
Mercer County coal-fired power plant

A federal agency is alleging a subsidiary of Public Service Enterprise Group made false and misleading statements in bidding into the nation’s largest energy market, a process that helps determine how much consumers pay for electricity.

The Federal Energy Regulatory Commission’s staff issued a preliminary notice of alleged violations by PSEG Energy Resources & Trade LLC, the company’s trading arm, over a nine-year period from early 2005 until March 2014.

The notice, issued late Thursday, comes at an inopportune time for PSEG, which is hoping to win approval this week from both houses of the Legislature of a much-debated bill that would allow its nuclear plants to gain $300 million a year in ratepayer subsidies.

Without those incentives, PSEG has threatened to close three plants in South Jersey, saying they will not be profitable in the near future, a contention opponents have argued the company has failed to demonstrate.

Opponents of the subsidies

The disclosure of the preliminary findings by the agency rippled the past weekend through a loose coalition of groups trying to derail the nuclear subsidies. They long have disputed PSEG’s assertion the plants will likely lose money when existing contracts expire in a couple of years.

The alleged violations by the company cited by the commission should be reason for pause, critics said.

“It should at least suggest the administration should proceed with a yellow light before it hands out $3 billion in subsidies,’’ said Steven Goldenberg, an attorney representing large energy users who oppose the bill.

“It underscores, for me, the need for diligent oversight in the whole review of the nuclear process,’’ said Division of Rate Counsel Stefanie Brand, who has been fighting to ensure she is included in the state review of whether PSEG deserves the subsidies.

PSEG self-reported inaccuracies

PSEG reported the incorrect cost-based bids for its New Jersey fossil generating plants into the PJM energy market in April 2014, according to Michael Jennings, a company spokesman. The notice is a routine part of that process, he said.

In its most recent 10-K filed with the Securities and Exchange Commission, the company said it discovered it “incorrectly calculated certain components of its cost-related bids’’ for its plants in the PJM market.

According to the filing, “Power believes disgorgement and internal costs related to the cost-bidding matter may range between $35 million and $135 million.’’ Disgorgement is a term linked to unjust compensation, according to Paul Forshay, an energy lawyer based in Washington, D.C.

PSEG has set aside $35 million over the issue, Jennings said. FERC did not reply to calls for comment. Joseph Bowring, the Independent Market Monitor for PJM, is aware of the investigation, but declined to comment.

No full disclosure

The extent and nature of the violations were not fully disclosed by FERC in its three-paragraph notice, but they involve how PSEG submitted bids into PJM’s energy market, which decides what and when power plants run throughout its 13-state region, including Washington, D.C.

Essentially, the market picks the lowest-cost power producer first, selects the next cheapest offering next, and so on until the grid operator has all the supply it needs to meet demand. All power suppliers end up getting the price awarded the last bidder.

Legal defense

In the filing, PSEG Power, the company’s generating subsidiary, said it “continues to believe that it has legal defenses that it may assert in a judicial challenge, including the legal defense that its cost-bidding in a substantial majority of the hours was below the allowed rate under the tariff and therefore any errors in those hours did not violate tariff or were immaterial.’’

On its website, the federal agency notes it issues a preliminary notice of violation after staff has presented the subject of the investigation with its preliminary findings, gives the subject an opportunity to file a written response, and allows staff to analyze the subject’s response.

Sponsors
Corporate Supporters
Most Popular Stories
«
»