Should Consumers Pay Surcharge to Help Defray Cost of Nuclear Energy?

PSEG argues that nuclear units should be awarded zero-emission credits, similar to those used to subsidize solar, another carbon-free source of power

Salem nuclear power plant
The state subsidizes solar installations through a surcharge on consumers’ utility bills, an expense that likely will be expanded to finance offshore wind farms some day. Do nuclear plants, the biggest source of carbon-free electricity, merit similar help?

Public Service Enterprise Group believes so. The owner of three nuclear plants in South Jersey, it is pushing for this type of incentive, one that is winning support in various states. Just last week, the New York Public Service Commission’s staff proposed so-called zero-emission credits to help keep nuclear units in upstate New York afloat.

In New Jersey, however, a state long burdened by high energy costs, any proposal to boost bills to customers faces steep odds. Economics aside, there also is a part of the public that would be glad to see more nuclear plants shut down for a range of environmental and safety reasons.

Such an event would have far-reaching implications, some argue. If nuclear units are shuttered, they would likely be replaced by fossil-fuel-burning natural-gas plants, hindering efforts to fight climate change. Those new plants also would boost costs to consumers, according to PSEG.

Not so fast, say skeptics of a zero-emission incentive. For one thing, the circumstances here in New Jersey are different. PSEG CEO, Chairman, and President Ralph Izzo acknowledged as much last month at an NJ Spotlight Roundtable, when he noted that his company’s nuclear plants are profitable, unlike the New York units.

But PSEG still contends energy policies fail to value nuclear as a carbon-free source of electricity, providing 97 percent of the power in the state with no greenhouse-gas emissions contributing to global climate change. Giving nuclear units financial incentives only levels the playing field with solar and other fuels, according to PSEG.

Many are unconvinced. “I don’t think frankly it has legs in New Jersey,’’ said Steven Goldenberg, an energy attorney who often has been an adversary of PSEG, noting the issue of subsidies for nuclear is part of an ongoing national debate.

“This is something that requires a national solution. If you establish a value, it should be done on a national basis,’’ Goldenberg said.

Such a concept would move the national debate over a carbon tax on fossil fuels — an idea that has gone nowhere — to establishing a positive incentive to keep the nuclear industry viable.

That, too, may not be feasible — given the subsidies that could be handed out under a zero-emission incentive. In New York, the incentive for four nuclear units would amount to $965 million over two years. The incentives would increase over a 12-year period, rising to $805 million in each of the two final two years.

“It’s a pretty generous subsidy to reflect the value of nuclear power,’’ noted Paul Patterson, an energy analyst at Glenrock Associates in New York City “It’s not a drop in the bucket.’’

Staff from the commission defended the incentive, saying the advantages of the zero-emission credits — carbon reductions, supply-cost saving, and property-tax benefits — far exceed the costs to the tune of $4 billion.

New Jersey Division of Rate Counsel Director Stefanie Brand said the different conditions in New Jersey and on the regional grid fail to demonstrate a need for any new incentives. Among other things, PSEG’s nuclear units are still receiving lucrative capacity payments for their power, unlike those in New York.
Both Brand and Goldenberg also argued that any state subsidies to help the nuclear sector would run into problems with PJM Interconnection, the Federal Energy Regulatory Commission, and the courts. They noted that federal courts struck down a New Jersey law, which sought to encourage building of natural-gas plants by awarding them ratepayers’ subsidies.

Finally, they question why customers ought to have to pay new financial incentives for the nuclear units when they just finished paying off about $3 billion to PSEG for stranded costs stemming from deregulation.

Paul Rosengren, a spokesman for PSEG, said the company has not had a chance to review the New York proposal. “Clearly, something has to be done to make sure the tremendous environmental benefits of nuclear are maintained,’’ he said.

Surprisingly, Jeff Tittel, director of the New Jersey Sierra Club and a frequent critic of PSEG, is open-minded about the concept of helping nuclear plants. “We need to keep them going as we transition to renewables, but the concern is it should not be at the expense of renewable energy,’’ he said.