Competitive electricity markets work. They work best when the market rules and structure are well defined, transparent and properly regulated and when the participants work together to find the right solutions.
New Jersey has benefited from competitive markets and from proper regulation with respect to Basic Generation Service and reasonable investment in power generation, transmission, demand response, energy efficiency and conservation.
The proper balance between market price signals, well defined-market structures and properly developed government programs is essential for long-term success, and to control costs for electricity consumers.
The recent passage of a bill that requires New Jersey residents and businesses to subsidize the development of new power plants upsets that balance.
Quite simply, the power plants the state government seeks to develop through legislation have not been developed by the free market because they are not needed and not economical because of declining wholesale electricity prices, more than ample supply of existing generation and the growth in demand response, energy efficiency and energy conservation programs.
Given the opportunity, smart businesspeople will readily transfer financial risks from themselves to someone else. In this case, power plant developers are not willing to place their money at risk, but more than willing to place consumers’ money at risk.
State-subsidized power plants will cost New Jersey more in the long run than they will save and will result in more jobs lost than gained. Also, existing plants will be modified or shut down because their economics will change due to this legislation and since they can’t compete with plants that customers are subsidizing. This will also hurt the development of future generation — including renewable energy.
The best course of action for New Jersey electricity consumers is to let the market work. Let developers bear the risks of their investment decisions, not consumers. In that way, the most economical solutions will be adopted and consumers will benefit.