Bill to Subsidize Power Plants Proves Elusive

Legislation stalls in committee, advocates argue that ratepayer financing would be offset by lower energy costs

Getting a bill to promote power plant development through the New Jersey legislature is proving to be more difficult than anticipated.

Unable to reach any consensus, the Assembly Telecommunications and Utilities Committee adjourned Thursday after a brief recess, unwilling to move a bill that aims to promote development of new power plants by guaranteeing a stream of payments from ratepayers to the facility.

The legislation had moved swiftly through the Senate and seemed on the fast track to become law but has become embroiled in a pitched battle between big power companies, energy efficiency advocates and environmentalists on one hand and state officials and business interests on the other.

The bill is likely to come up again either Thursday or a week from Monday, according to legislative sources.

A Sweetheart Deal

Critics have derided the bill as a sweetheart deal for one or two developers who will be guaranteed payments from ratepayers to cover capacity costs or to provide energy when a customer turns on a light. The stream of payments would help developers line up the financing they need to build the plant.

Advocates, who include the state Division of Rate Counsel, argue the bill could help drive down high energy bills for all customers by providing new generating capacity. Because of congestion on the power grid, customers in New Jersey are paying some $1 billion more for electricity than consumers in neighboring states.

Division of Rate Counsel Stefanie Brand said an expert hired by her offices estimates that consumers could save $300 million per year if a new 1,000-megawatt power plant was added to supplies in New Jersey, which would far offset the capacity payments made by ratepayers.

Opponents concede the bill may drive down capacity prices in the short tem, but will burden the people of New Jersey with higher rates for a majority of the term of the contracts, to the benefit of a few companies.

The Sticking Point

The sticking point in yesterday’s discussion was how many new plants should receive the subsidies. The Senate version of the bill mandates 1,000 megawatts but is worded so that only one facility, a proposed 600-plus megawatt natural gas-fired plant in West Deptford would likely qualify.

Brand and other Christie administration officials want to expand the bill to include more plants and have the developers selected in a competitive process overseen by the state Board of Public Utilities (BPU). But Assemblyman Upendra Chivukula (D-Middlesex), balked at setting any number, saying he had seen no detailed analysis suggesting what level of new capacity should be set.

Joseph Bowring, president of Monitoring Analytics, the former market monitoring unit for PJM Interconnection, the regional power grid, expressed reservations about the bill.

“It could artificially depress capacity prices in an area much larger than New Jersey,” Bowring said. “When you intervene in markets, you have to be careful because there can be unintended consequences.” Those consequences could discourage any new building of power plants, a prospect that would reduce reliability and increase prices in the long run, he said.