Why Is it So Tough to Build New Power Plants in New Jersey?

Frustrated Board of Public Utilities opts to investigate rules and policies that may be slowing the development of new generating capacity.

Gas powerplant
Frustrated with its efforts to develop new power plants in New Jersey, a state agency yesterday decided to initiate a far-ranging proceeding into how to develop new generating capacity, a move it believes could lower steep electric bills for consumers.

The Board of Public Utilities (BPU) hopes to begin holding hearings on the issue this summer and conclude the effort by the end of the year. It is an ambitious timeframe, but one that reflects the increasing concern the commissioners have with federal authorities and the operators of the regional power grid, PJM Interconnection, over policies and rules they believe have thwarted the building of new power plants in New Jersey.

The decision to open a proceeding on the issue comes in the wake of a ruling earlier this spring by the Federal Energy Regulatory Commission (FERC) to adopt new rules that most observers believe will scuttle plans to build three new power plants in the state. Under a pilot program approved by the legislature and Gov. Chris Christie, the developers of the plants would receive ratepayer subsidies to help the projects obtain the necessary financing from banks.

Failed Policies

Beyond exploring how to build new generating capacity, the state agency will also examine other issues that have been a source of frustration in recent years. High on the list is why few new plants have been built since PJM adopted a controversial new rule designed to incent power suppliers to construct additional generating capacity.

That rule has been a particular point of contention between state officials and PJM, with the former arguing it has been a total failure. They note it has helped increase energy prices in areas where the power grid is particularly congested, adding $1 billion to consumers’ bills in New Jersey this year alone.

In addition, the proceeding will try to determine what other rules and regulations are acting as impediments to new power plants getting built. Along those lines, BPU President Lee Solomon said the proceeding will explore if the regional transmission planning process put in place by PJM is working as well as it should.

Exporting Power

The decision to begin a new proceeding on the issue came midway through the BPU’s bimonthly meeting, after it had voted to intervene in a number of cases currently before the FERC. The latest involves an effort by Hudson Transmission Partners, LLC to export 660 megawatts of power from a substation in Bergen County to Consolidated Edison in Manhattan through an underground cable.

Solomon expressed repeated concerns that the project would only exacerbate congestion problems in New Jersey, as well as increase the cost of capacity in the state.

“FERC decided this is a good thing?” asked Solomon.

“Not yet,” replied a staffer.

“I think it’s outrageous. I would say, not only to intervene, but to do it in a robust way,” Solomon said.

Commissioner Joseph Fiordaliso agreed. “I don’t see how New Jersey ratepayers benefit,” he said, adding, instead they “get hurt.”

No Special Incentives

In addition to that case, the board approved the staff’s earlier efforts to intervene in a case in which Public Service Electric & Gas (PSE&G) is seeking special incentive rates for five transmission projects it is undertaking. It is also asking the federal agency to reconsider or grant a grandfather exemption to allow it to build the three power plants under the pilot program without following the agency’s new rules.

In the PSE&G case, the utility is seeking to begin collecting rates from energy customers even before the proposed projects are completed, as well as recover 100 percent of what it has spent if the project is cancelled through no fault of the utility.

Even more troublesome, to some commissioners, is a request that the utility also be allowed to transfer those special incentives to an affiliate if it so decided.

“I want to know who ultimately benefits if the transfer occurs,” said Solomon.

But Tamara Linde, an attorney for PSE&G, said the language dealing with transferring the incentive rates was merely boilerplate language typical in a FERC filing. PSE&G recognizes if it did seek to transfer the incentives to an affiliate, it would have to be approved by both the board and FERC, she said.