New Jersey faces a mountain of challenges right now. Between some of the highest tax rates in the country, notoriously stiff energy costs, and a host of other affordability issues, residents of the Garden State have been forced to deal with a lot.
One idea floating around Trenton could make matters worse. In short, the energy company PSEG is vying for a special legislative deal to subsidize its New Jersey facilities. For a long time, the proposal has been hidden from the public — but its impact on New Jersey businesses and citizens can’t be ignored.
Let’s start with the facts. While several state legislatures have flirted with nuclear subsidy deals in recent years, the result has always been the same: higher rates for consumers. The model New Jersey is considering (whereby nuclear generators are awarded what are called “zero-emission credits”) has already gone into effect in Illinois and New York. In both of those places, consumers are now paying 50 percent to 75 perent more than the market price for the same electricity they used before the nuclear energy taxes were passed. Crunching the numbers for New Jersey, the data shows consumers here would pay over $300 million annually on top of their existing energy costs.
Also worth consideration is the financial status of PSEG and its plants. By the company’s own admission, the plants are and will remain profitable through at least 2019. Ralph Izzo, PSEG’s CEO, has reiterated elsewhere that both plants are undeniably “in the black.” PSEG, which is Newark-based, has also made over $753 million in net income this year alone. The details go on, but the picture is obvious: the plants are far from emergency, the company is thriving, and the desired “assistance” is therefore little more than unnecessary corporate welfare.
Even so, what if PSEG’s New Jersey units really did land on hard times? No one would deny that nuclear producers haven’t faced challenges in recent years.
The answer to this question is simple. If the plants begin to struggle, they and the company can (and should) utilize existing regional solutions. Both plants (Hope Creek and Salem) provide energy across state lines. It is therefore wrong to pin any potential assistance purely on the checkbooks of New Jersey residents. What’s more, Gov.-elect Phil Murphy has announced his intention to rejoin the Regional Greenhouse Gas Initiative (RGGI), which, as its name suggests, is a cross-state endeavor. That system would allow the plants to get tens of millions of dollars in extra revenue on an annual basis. There’s also PJM, the regional grid operator, which has existing protocols for struggling generators and is proposing price formation reforms to prop up struggling energy sources. Also relevant is the federal government, which is examining national reforms to help nuclear providers in the wholesale power market.
The political reality is equally important. The chairman of the Senate Environment and Energy Committee (one of the legislative committees considering the proposal) said this spring that the proper starting point for potential assistance was a study. There are also numerous valid questions about PSEG’s desire to push a bill through the lame-duck session, where the timeframe for scrutiny and dissent is tight and special deals try to go unnoticed.
All of this suggests a subsidy from Trenton is not (nor would it ever be) the way to go. And New Jersey residents agree. One survey showed that “69 percent of voters oppose the state Legislature giving a financial subsidy to a nuclear power company that would be in addition to the revenue that company already receives from New Jersey customers.” Other research, by the Rutgers Eagleton Center for Public Polling, demonstrated that 75 percent “are not interested in subsidizing already profitable nuclear power companies.”
In the end, lawmakers must ask themselves a fundamental question: Should New Jersey ratepayers fund a policy that will inevitably wreak havoc on their energy bills, just to subsidize nuclear plants that are currently secure and can rely on regional solutions should they ever need help?
It may seem like a loaded question, but the answer, again, is simple. A special deal for PSEG is not necessary assistance or wise public policy. It’s an energy tax hike, and New Jersey mustn’t succumb to it.