BPU President Paints Broad Picture of NJ’s Energy Future

Tom Johnson | October 28, 2010 | Energy & Environment
In a wide-ranging talk, Lee Solomon touches on the Energy Master Plan, aggressive targets for renewable energy and a controversial surcharge -- among other topics

The state is exploring ways to encourage new power plants to be built in New Jersey. If the number of facilities is not increased, it will result in higher energy bills for consumers and the prospect of power outages, Board of Public Utilities president Lee Solomon told business leaders yesterday.

“If we don’t do something, the ratepayers will suffer and the lights could go out,’’ Solomon said, speaking at a breakfast meeting of the New Jersey Chamber of Commerce at the Forsgate Country Club in Monroe. ”If we don’t do something quickly, the crisis starts next summer.’’

Solomon covered a wide range of topics, ranging from the new administration’s plans to revisit the state’s Energy Master Plan, its aggressive targets for increasing reliance on solar and other forms of renewable energy and the possible elimination of a surcharge that funds popular clean energy projects and energy assistance programs for low-income families.

Solomon offered few specifics but promised changes aimed at promoting economic development. “Whatever we do will have an impact,’’ Solomon said. “It will change the direction of the state for years to come.’’

Cutting Energy Costs

High on the agenda is reducing energy costs in New Jersey, especially in northern New Jersey, where congestion on the regional power grid results in added charges to customers’ energy bills, which could cost ratepayers as much as $1 billion annually, according to the state’s energy plan.

“It isn’t working,’’ Solomon said, referring to a system set up by PJM Interconnection, the operator of the regional power grid. The goal is to encourage new plants to be built and ensure that older ones needed to retain reliability of the grid are not retired prematurely.

The system, dubbed the Reliability Pricing Model (RPM), hits New Jersey customers especially hard.

Peaking Plants

Since the state deregulated the energy industry a decade ago, few new power plants have come on line, except for so-called peaking units. These typically run on hot summer days, when energy demand is highest. The plants ensure the lights stay on but lead to huge spikes in electricity costs because they are so expensive to run.

The BPU president was short on specifics as to how the state would incent power suppliers to build new plants, although he noted that he supported distributed generation and favored combined heat and power plants.

The agency’s staff has been talking with PJM, the state’s electric utilities and others on what kind of incentives are needed to spur construction of new power plants, he said.

Among other things, Solomon said the staff is looking at whether the state should tap the clean energy program to build combined heat and power plants and other forms of distributed power. “It takes a lot of pressure off the grid,’’ he noted.

Establishing a Floor Price

The issue also has drawn the attention of lawmakers. Sen. Robert Smith (D-Middlesex) has introduced a bill (S-2381) that would establish a pilot program to encourage construction of new gas-fired power plants by creating a floor price for power the unit generates over a 15-year time frame. The incentive is viewed as a way of reducing risk to power suppliers who build new generating units here as well as decreasing reliance on out-of-state power.

The bill appears designed to boost prospects of a specific project proposed by LS Power, which wants to build a 1,200-megawatt natural-gas-fired plant in West Deptford in Gloucester County, which is represented by Senate President Stephen Sweeney.

Solomon also sought to reassure the solar industry, which is fearful the new administration will reduce aggressive goals, even though he made it clear changes could occur in how the state uses money from solar renewable energy certificates (SRECs), credits owners of solar systems receive for the electricity generated by their panels.

“The goal is not to destroy the solar industry,’’ he said. Solar farms should be encouraged to be built on brownfields, Solomon said, but he preferred they avoid agricultural lands, which should be preserved as open space. In addition, the state needs to decide whether its current targets for increasing the use of renewable energy are appropriate and realistic.

As for the societal benefit charge (SBC) surcharge on energy bills, which last year brought in $740 million, Solomon said one of his goals is to figure out a way to convert the surcharge into a revolving loan fund, which replenishes itself.

“It’s not going to happen overnight,’’ he conceded, but adding that over time it might be possible to shrink the SBC down to zero. “Can it be done? I think so.’’

The surcharge has been a source of bitter complaints from industry, which use 64 percent of the electricity consumed in New Jersey and so ends up paying a big chunk of the SBC fund.