Will Trump Administration Give PSEG — Other Utilities — Nuclear Subsidies?

Tom Johnson | October 2, 2017 | Energy & Environment
Letter to FERC says value of baseload plants that produce power all the time is not accurate reflection of their role

Hope Creek nuclear generating station
The Trump administration is proposing to bolster the fortunes of coal and nuclear power plants, a step aimed at averting early shutdown of units across the nation, including some in New Jersey.

U.S. Energy Secretary Rick Perry asked a federal agency Friday to draw up new regulations to compensate so-called baseload generating facilities that are critical to the reliability of the electric grid.

The request is significant for New Jersey, because Public Service Enterprise Group has been lobbying policymakers here, the operator of the regional power grid, and Washington officials for lucrative financial incentives for its three nuclear units in South Jersey, which are facing economic challenges due to cheap natural gas.

So far, the Newark company has yet to make much headway, but Perry’s letter to the Federal Energy Regulatory Commission could provide the help it has been seeking to prevent it from prematurely shutting its units down. Perry argued in his letter the current energy markets are not accurately pricing the value of baseload plants that produce power all the time and reliably.

“PSEG has long supported a national policy that would recognize the valuable benefits that nuclear power provides to our customers,’’ said Ralph Izzo, chairman, president, and CEO of the company. “This is an important step toward helping ensure consumers benefit from nuclear power.’’

Critical scorn

But the proposal drew quick scorn from critics, including other power suppliers in the competitive energy markets.

The Electric Power Supply Association, an industry trade organization, said it was still reviewing the proposal but called it ill-advised in key aspects. “The notable silver lining is that while the DOE proposal is pending at FERC, states need not act to subsidize coal and nuclear units as some uneconomic resources have been seeking, said John Shelk, president and CEO of the group.

New York and Illinois already have stepped up and awarded substantial subsidies to be paid by ratepayers to avert the closing of nuclear plants. No bill has been introduced here in New Jersey, but business groups and consumer advocates have formed a coalition to oppose any such incentives here.

Nuclear not coal

The push to subsidize coal plants is not an issue here because PSEG shut down the last two big coal plants in New Jersey this summer. Without the subsidies for its three nuclear units, PSEG has been saying it may have to close the plants, a prospect that could lead to higher prices for consumers and hamper the state’s efforts to curb greenhouse-gas emissions.

That view is disputed by environmentalists like the Natural Resources Defense Council, which issued a statement that said the administration proposal would lead to higher energy bills for consumers and businesses as well as dirtier air.

“Consumers should be very wary about how this will hit them in their pocketbook,’’ agreed Jeff Tittel, director of the New Jersey Sierra Club, who added the proposal could steer needed investments away from clean energy, such as solar and wind.

PSEG’s nuclear plants are still profitable, the company concedes, but given the trends in the sector, they could end up not having a positive cash flow within a few years.

Still, the move to prevent premature closing of nuclear power plants is an issue that has been debated at length in recent months, not only at the state level, but also at PJM Interconnection, the nation’s largest power grid, and FERC as well.

“It points to the strong political support for this type of baseload generation,’’ said Paul Patterson, an energy analyst at Glenrock Associates in New York. “What they are trying to do is raise prices.’’

The power sector has been struggling ever since vast new supplies of natural gas have been tapped in Pennsylvania and neighboring states, making it more difficult for nuclear units to compete in the unregulated energy markets.

In his letter, Perry noted the changing electricity sector is causing the closing of many coal and nuclear plants. “My proposal will strengthen American energy security by ensuring adequate reserve resource supply and I look forward to the Commission acting on it swiftly,’’ he said. Perry wants the agency to act within 60 days.