CPV Breaks Ground for New Power Plant — Though Subsidies Are in Doubt

Maryland company begins building $845 million natural-gas plant in Woodridge

Credit: Governor's Office/Tim Larsen
Gov. Chris Christie (center) and other state officials including Senate President Stephen Sweeney (third from right) and Robert Hanna, president of the state Board of Public Utilities (second from left),to the governor's right) took part in a groundbreaking ceremony yesterday for for the $845 million natural-gas plant being built by Competitive Power Ventures in Woodbridge.
Yet another big power plant is moving forward in New Jersey — once again without any guarantees of subsidies from utility customers to help pay the cost.

In a groundbreaking ceremony yesterday attended by both Gov. Chris Christie and Senate President Stephen Sweeney (D-Gloucester), Competitive Power Ventures (CPV), a Maryland company, began building an $845 million natural-gas plant in an industrial section of Woodbridge, one of three plants awarded lucrative subsidies by the state to spur their development — though it’s not known if it will ever receive them.

The event, hailed by the governor and other state and local officials, could help reduce electricity costs in New Jersey, a goal long sought by both the Republican administration and Democratic-controlled Legislature in a state where energy costs rank among the highest in the nation. More power plants help curb congestion on the power grid, a problem that spikes the price of electricity.

But the building of the 700-megawatt facility in Woodbridge again raises questions about a controversial law enacted by the Legislature and signed by Christie to award up to $3 billion in ratepayers’ subsidies, including as much as $1.3 billion to CPV, to ensure that three new power plants are built in the state. Some say the grants were never needed, an argument bolstered by recent trends in the energy sector.

Whether those subsidies, to be paid out over 15 years, will ever be delivered to those companies remains highly uncertain. A federal court ruled earlier this month that the state law was unconstitutional, raising questions as to whether ratepayers will be on the hook to prop up those plants with new surcharges on their bills mandated by the Legislature and Christie administration.

Even with the federal court decision, which may be appealed, CPV has decided apparently to move ahead with its project. Asked why the company decided to commence construction, Braith Kelly, a spokesman for CPV, said there will be a hearing before the federal court on Friday, when a final order is expected to be delivered by the judge.

“We will be able to comment after that is complete,’’ Kelly said.

Hess, which plans to build a plant in Newark, is in much the same situation. Whether or not it will receive the subsidies it was awarded depends on the outcome of the court case. NRG Energy was also awarded subsidies to build a generating unit in Old Bridge, but the company is no longer pursuing the project.

In addition to those projects, LS Power already has broken ground in West Deptford for a natural gas-fired plant. The irony of that 738-megawatt project moving forward is that it was the spur for lawmaker to develop the plan to award subsidies to new generating units in New Jersey, but it failed to win any subsidies from the New Jersey Board of Utilities. Even without the subsidies, it began building in early 2012.

Industry analysts say the steep drop in natural-gas prices has made new plants more competitive with incumbent generating facilities, allowing them to move forward without state support, as they have argued in legislative hearings and then again before the federal courts.

“We’ve contended all along if market signals are appropriate, these plants will get built,’’ said Glen Thomas, president of PJM Providers Group, a coalition of power suppliers. ”They are moving forward with the risk on their investors, not on the backs of ratepayers.’’

Paul Patterson, an energy analyst with Glenrock Associates in New York, said it is not surprising the Woodbridge project is moving forward, even without the state subsidies. “Is it shocking, not — given the number of no-state-supported projects moving forward,’’ Patterson said.

The project is expected to provide up to 500 jobs during construction, as well as 25 permanent jobs, according to the company in a press release.

Interestingly, the Governor’s office did not put out a press release or video about the groundbreaking — even though the project has potential big economic benefits for Woodbridge and surrounding communities — a failure that Thomas found telling.

“Here’s a $845 million project and there’s no press release,” Thomas said. “I guess it is not your typical groundbreaking.”

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