Sarlo Airs Concerns About Nuclear Subsidies at Budget Committee Hearing

BPU president Mroz favors regional approach to problem, rather than a state-by-state solution

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The chairman of the Senate Budget Committee expressed misgivings yesterday about handing out subsidies to help struggling nuclear power plants, an issue that has been quietly percolating in the State House for months.

In a routine budget hearing, Sen. Paul Sarlo (D-Bergen) raised the topic in questioning New Jersey Board of Public Utilities president Richard Mroz, while noting that a steep drop in natural-gas prices is affecting the viability of coal and nuclear power plants.

The state ought to be concerned about the nuclear plants, Sarlo said, noting they account for 97 percent of the pollution-free electricity generated in New Jersey. New York and Illinois have awarded subsidies to aid fiscally strapped nuclear units there.

“Some states are knocking on the door of the treasurer’s office. Have you had any discussion with the treasury about subsidies for the nuclear industry, which is problematic, I believe?’’ Sarlo asked.

Mroz acknowledged he has discussed the issue with the industry, but denied awareness of any proposal to give out subsidies to nuclear plants.

A top priority

The issue has become the top priority for Public Service Enterprise Group, the owner of PSEG Power, the operator of three nuclear units in South Jersey. Its top executive has threatened the units may close in the future if they turn unprofitable, a prospect facing other nuclear plants around the nation.

PSEG’s CEO and president Ralph Izzo said the full value of nuclear as a carbon-free and reliable source of electricity is not being reflected in its price. Should the plants close, it would lead to steep increases in electricity prices for consumers and business, Izzo said.

The idea of subsidizing the plants is strongly opposed by consumer advocates, business interests, and others who say the company has failed to demonstrate the units are not profitable. They also question why ratepayers, who paid nearly $3 billion in stranded costs for the company’s power plants after the state deregulated energy markets, should be asked once again to subsidize the nuclear units.

How to retain nuclear power in a rapidly changing competitive marketplace is a question being debated in state capitals; at the PJM Interconnection, the operator of the regional power grid; and at the Federal Energy Regulatory Commission in Washington, D.C.

Regional approach

In his comments, Mroz seemed to favor a regional approach to solving the problem, rather than that taken by New York and other states. In New York, consumers will pay about a half-billion dollars more a year to help keep nuclear units afloat upstate.

Nuclear energy accounts for 45 percent of the electricity in New Jersey, Mroz noted. “It’s a big asset, a critical asset,’’ he said. “It’s a great asset that I think needs to be considered for full value by the grid operator, PJM.’’

Mroz said he is looking at the potential for a “PJM-driven solution around valuing the generation that comes from nuclear plants.’’

PJM floated a concept paper/straw proposal advancing how nuclear plants could be valued more highly at a conference in Washington, D.C., earlier this month. The paper is at the very beginnings of discussion, according to Andy Ott, president and CEO of PJM.

The paper suggests a carbon-pricing framework to establish a price-per-ton of carbon emissions by suppliers emitting the pollutant, a means of improving the relative competitiveness of resources that do not emit carbon (nuclear). The framework could operate on a regional or subregional basis, according to the paper.

The advantage of a regional solution is it would be cheaper and more effective than a single-state approach, Ott said.

Ideally, PSEG would favor a solution negotiated at a federal or regional level, according to Michael Jennings, a spokesman for the company. Nevertheless, it believes any immediate solution would have to come at the state level, he said.

“If we wait for stakeholders and policymakers to reach consensus on a regional or federal solution, it will most likely arrive too late for many of the nation’s nuclear plants,’’ Jennings said.

Ott acknowledged a regional consensus would take at least two years to reach.