Connecticut Site is No-Go for New PSEG Power Natural-Gas-Fired Plant

Tom Johnson | February 6, 2015 | Energy & Environment
Company fails to qualify in capacity auction, making project in Bridgeport economically unfeasible

PSEG's Bridgeport Harbor generating station in Bridgeport, CT.
PSEG Power’s plans to build a 450-megawatt natural-gas-fired power plant in Bridgeport, CT, have been put on hold.

The subsidiary of Newark-based Public Service Enterprise Group failed to win approval from the operator of the New England power grid during an auction this week to qualify for payments that would make the project economically feasible.

The company sought to build the plant to provide the necessary capacity to help ensure the power grid there had enough juice to supply customers — a recurring concern in the region.

If it had cleared the auction, it would have been entitled to capacity payments above and beyond the electricity produced by the new plant, which would have been located next to an existing coal-fired plant in the Connecticut city.

Without the so-called capacity payments, independent power generators such as PSEG Power are hesitant to build new plants because they afford a lucrative stream of revenue that makes the project more profitable.

PSEG Power expressed disappointment that its bid to win capacity payments failed to clear the auction — energy jargon for qualifying for the money paid out — but vowed to press forward with the project.

“We are a disciplined investor and submitted a bid that we felt was prudent,’’ according to a statement by the company.

“”We continue to believe that a state-of-the-art clean combined-cycle plant in Bridgeport would bring many benefits –jobs, tax revenue for Bridgeport, and reliable, clean energy for the region.’’

In addition, the company said the “work we did — and continue to do — in developing the plant and partnering with the community will allow us to be ready when and if the markets indicate support for the investment in future.’’

Paul Patterson, an energy analyst, said the statement indicates that “at the right price,’’ Public Service is willing to invest in additional generation, a strategy that has taken less of a priority in recent years than the company’s capital investments in its poles and wires business.

PSEG Power has been wary of building new power plants without full confidence the projects will be profitable. In 2012, the company considered building a new gas-fired plant in Seawaren, NJ, but backed off because of a controversial program that the state adopted giving subsidies to some plants to help them get built.

Last fall, Ralph Izzo, the chairman, chief executive, and president of PSEG, told analysts on an earnings call, the company was considering building the new plant at its Bridgeport Harbor facility. The plant could have cost up to $600 million. The company would have retained an existing coal-fired plant at the location.

Unlike New Jersey where capacity payments are only guaranteed for three years following an auction, in New England, projects that clear its auction have payments spread out over seven years.

High capacity payments have emerged as a controversial issue in New Jersey, driving the cost of electricity much higher than in neighboring states, totaling more than $1 billion in some years.

PSEG Power is by far the largest provider of electricity in New Jersey, with a fleet of 16 fossil-fuel plants, a few of which are in Pennsylvania and New York, as well as three nuclear generating stations in South Jersey and part ownership in another in Pennsylvania.