New Industry-Led Coalition Opposes Nuclear Subsidies to PSEG

Tom Johnson | November 29, 2017 | Energy & Environment
Deriding ‘PSEG energy tax,’ group argues there’s no need for subsidies since company’s South Jersey nuclear plants are still profitable

PSEG Power's nuclear generating facility on Artificial Island
A new industry-led coalition is lining up to oppose efforts by the state’s largest energy company to ask ratepayers to subsidize its three nuclear power plants in South Jersey.

The New Jersey Coalition of Fair Energy said it would campaign to “Stop the PSEG Energy Tax,’’ a reference to a lobbying drive by the Public Service Enterprise Group to prop up its nuclear units with subsidies similar to those imposed on utility customers in New York and Illinois.

The announcement comes at a time when opponents worry PSEG will try to steer a yet-to-be-seen bill through the lame-duck session in the next five weeks — before a new Legislature and governor take office.

Ratepayer subsidies in place

With cheap natural gas driving power prices down, the nation’s nuclear and coal plants are facing economic challenges with more than a half-dozen closing prematurely in the past few years. New York and Illinois have approved ratepayer subsidies to prevent retirement of nuclear units in their states, while PSEG has threatened to close its units here if they turn unprofitable.

“We’re here to say that New Jersey residents can’t afford another tax increase that will cost them hundreds of millions of dollars on their electricity bills,’’ said Matt Fossen, a spokesman for the coalition. The coalition includes Calpine Corp., Dynergy, and NRG Energy of Princeton, as well as the Electric Power Supply Association, an industry trade group.

“PSEG has earned billions of dollars in revenue in recent years and the company is on record saying its plants will remain financially viable in the future,’’ Fossen added. “The PSEG energy tax is a ‘solution’ to a problem that does not exist.’’

Crucial to reliability

Ralph Izzo, PSEG’s CEO, president, and chairman, has acknowledged the plants are currently profitable, but warned, given industry trends, the units could turn unprofitable in the next few years. The company argues nuclear units are undervalued because they produce carbon-free electricity and provide needed fuel diversity for the energy sector, crucial to the reliability of the power grid.

The changes roiling the industry have prompted efforts to prop up both coal and nuclear at the federal level; the Trump administration has proposed giving financial incentives to those plants and at PJM Interconnection, the regional power-grid operator. Neither plan has been acted on yet.

New Jersey also is expected to rejoin a regional initiative to curb greenhouse gas emission from power plants, a step that could bolster the economics of PSEG’s nuclear units, the coalition noted. With the proposal by PJM, the policies, if adopted, could make the nuclear units more profitable, Fossen said.

“They should be given a chance to work,’’ he said. “There is no need for the Legislature to rush to pass a bill of such magnitude in a lame-duck session without a full and thoughtful examination of a subsidy and its implications on the cost of electricity and its impact on a fair, level, and competitive marketplace.’’

Nuclear power provides nearly half of New Jersey’s electricity. Supplying a safety net will save consumers in the long run, according to Michael Jennings, a spokesman for PSEG.

Supply and demand

“The laws of supply and demand are clear,’’ Jennings said. “If you remove nearly half the supply of a product, the cost of that product goes up — dramatically.’’

Jennings declined to say if, and when, any bill might be introduced in New Jersey. “The timing of any action is up to policymakers,’’ he noted.

Besides the energy-sector coalition, another group, the New Jersey Coalition Against Nuclear Taxes, has been organized by business interests, consumer advocates, and environmentalists to oppose any nuclear subsidy.

Although no detail of a possible subsidy proposal has been made public, opponents note that based on what has been handed out in other states, the proposed subsidy could range anywhere from $350 million to as much as $475 million per year over a decade.

“We believe that the best way to ensure fair and reasonable electricity prices is to respect and protect competitive energy markets, and these subsidies fly in the face of that on the backs of ratepayers,’’ said David Gaier, a spokesman for NRG Energy.