On Closer Look, PSEG Nuclear Subsidy Bill Outrages Opponents

Tom Johnson | December 19, 2017 | Energy & Environment
Some foes accuse PSEG of jiggering subsidy to reach the $300M - $350M it wanted in first place

salem nuclear plant
With a weekend to digest a bill to prop up New Jersey nuclear plants, foes were left fuming with many objections and one key question: how did advocates come up with the surcharge on customers’ bills?

The levy appears tiny ($0.004 per kilowatt hour), but has huge implications for ratepayers. It could provide anywhere from $300 million to $350 million a year to Public Service Enterprise Group, or at least $1.2 billion in subsidies over an initial four-year period.

“Was that number plucked out of thin air?’’ asked Ev Liebman, associate director of AARP of New Jersey. “We don’t know where that number comes from and there is no justification for it in the bill.’’

The legislation (S-3560), introduced late Thursday evening after a long year of intense lobbying by PSEG, is up for a vote in two legislative committees tomorrow. Unless it obtains financial help for its nuclear units in South Jersey, the company says it will shutter them.

Secret surcharge

The surcharge provision, tucked into a single paragraph in an eight-page bill, reflects a rare legislative intrusion into setting prices in a competitive energy market the state joined nearly two decades ago. Handing out subsidies to a big player in that market is a step that rankles rivals in the energy sector and the customers who will foot the bill.

“It sounds small, but for some of my members it could run $400,000 a year,’’ said Dennis Hart, executive director of the Chemistry Industry Council of New Jersey. “If they have more than one location, it’s a lot more.’’

For a typical residential customer, the cost amounts to about $31 a year, according to PSEG.

PSEG’s top executive has repeatedly warned that closing the plants will end up costing consumers more — $400 million a year according to economic analyses by a pair of consultants.

Still making money

Yet the company concedes the plants are still profitable, and will remain so for two years, as critics point out. “They may end up getting subsidies when they are profitable,’’ noted Steven Goldenberg, an attorney representing large energy users who will be hit hard by the proposed subsidies.

Some of his members will be paying a half-million dollars more for energy a year; two will pay up to a million dollars, Goldenberg claimed. “If you don’t think that influences corporate decisions about investment and whether to locate to another state, then I have a bridge to sell you,’’ he said.

When asked how the value of $0.004 was arrived at, PSEG said that is what the sponsors put on the value of preserving nuclear. Two consultants found nuclear is worth five to six times that amount when environmental, resiliency, and economic benefits are considered, according to Michael Jennings, a PSEG spokesman.

Opponents, however, speculated that PSEG always was intent on obtaining some $300 million annually in subsidies so came up with that number by dividing that number into total retail sales of electricity yearly in New Jersey. The company said it employed energy years 2011-2016, using Energy Information Administration data.

Sen. Bob Smith, a Democrat sponsor of the bill who is expected to steer it through the lame-duck session, did not return a call yesterday to his office. Senate President Stephen Sweeney is the other sponsor.

Too much power for BPU?

Beyond the cost, opponents also are worried about the prospect that the bill gives the state Board of Public Utilities responsibility to decide whether a company deserves the proposed subsidy. They also question why the bill fails to set what is an acceptable earnings level for a company seeking a subsidy.

“We question whether the BPU, established to regulate prices in a utility market, has the capacity, expertise, and wherewithal to evaluate prices and finances in the private sector,’’ Liebman said.

Others, including Division of Rate Counsel Stefanie Brand, question how the public will know whether the subsidies are justified — given that the bill provides confidentiality to financial information the company submits to the BPU.

Finally, some foes say it is not even clear if the bill prevents out-of-state nuclear plants to qualify for the subsidy.

PJM Interconnection, the operator of the regional power grid, once again expressed concerns about the proposed bill, disputing some of PSEG’s arguments about why it is necessary.

“PJM sees no evidence to indicate out-of-market payments to New Jersey generation resources are required to further reliability or fuel-security interests,’’ the organization said in a statement.

PSEG’s Jennings replied that PJM “has been discussing solutions to these issues for years and have done nothing to correct the market imperfections.’’