In Sixth Iteration, Nuclear Subsidy Bill Clears Committee

Tom Johnson | February 23, 2018 | Energy & Environment
One item in legislation remains unchanged from first draft - up to $300 million annual subsidy to keep PSEG's nuclear plants powered up

Senate President Steve Sweeney
In a vote along partisan lines, a bill to subsidize the state’s nuclear power plants and renewable energy won approval from two legislative panels yesterday, despite fears it could scuttle the Murphy administration’s clean energy agenda.

The approval signaled strong support, at least among legislators, for a controversial $300 million a year subsidy to Public Service Enterprise Group to keep its nuclear units in South Jersey open. It is the primary motivating force behind the initiative.

No Republicans voted for the bill, though all said they supported the nuclear subsidies. What worried them were the uncertain costs associated with promoting renewables, provisions put in at the urging of the governor’s office, according to Senate President Steven Sweeney, a sponsor of the original bill.

A four-and-a-half-hour hearing before lawmakers also revealed huge concerns about the bill (S-877) among environmentalists, even though the measure ramps up requirements that the state rely much more on renewable energy to produce electricity to power homes and businesses. By 2025, 35 percent of that electricity must come from renewable sources, which would jump to 50 percent by 2050.

The great subsidies debate

The debate over the renewable provisions and what it could cost consumers overshadowed, in part, what has been the consuming divisive issue of whether the nuclear plants, operated by PSEG, need lucrative subsidies to stay open.

PSEG has threatened to close its three nuclear units in South Jersey unless it gets the financial incentives, saying they will no longer be profitable in two or three years. If they do, customers will end up paying more to replace that power, according to the company and others.

“In two or three years, those plants will not be economically viable,” said Ralph Izzo, chairman, president, and chief executive officer of PSEG. “Technology has changed,” he told the Senate Budget Committee and Assembly Telecommunications and Utilities Committee. Natural gas is abundant and cheap, he said, suggesting nuclear energy is less competitive.

The opposition

Foes of the nuclear subsidy disputed that view. “These plants are profitable,” argued Joe Kerecman of Calpine, a large energy company with natural-gas plants. “These nuclear plants used to make tons of money before shale gas came along.”

Izzo’s comments to the Bergen Record also sparked controversy, saying he wanted a return on capital of 18 percent for the nuclear plants, an interpretation disputed by the company.

“Asking ratepayers to assume the obligation to make sure PSEG Power (the company subsidiary) is earning 18 percent is beyond appropriate,” said Stefanie Brand, director of the New Jersey Division of Rate Counsel, in written testimony.

Brand, the last speaker in the half-day long hearing, warned of the significant costs the overall bill would inflict on ratepayers – at least $3.4 billion over the next decade, and that only includes the subsidies for nuclear and solar subsidies.

“We are going to see significant rate increases as a result of this,” Brand said.

Unpopular caps

In a way, the debate over renewable provisions of the bill may jeopardize its passage more than any other provisions. The biggest impediment appears to be provisions designed to cap the rate of increase subsidies for solar and other renewables impact customers’ bills.

With increasing criticism of the cost of solar borne by ratepayers, the bill includes language that would prevent the average customer’s bill rising by more than 5 percent based on subsidies provided to renewable energy.

“Because of the cap, the green-energy stuff will never get built, so at the end this will be a nuclear subsidy bill,” argued Jeff Tittel, director of the New Jersey Sierra Club.

Solar advocates meanwhile were upset the latest bill, that has had at least six iterations, eliminates a provision to eliminate the state’s system of funding solar, otherwise known as the solar renewable energy credit (SREC) program. Virtually everyone agrees the current system is broken, too expensive, and needs to be revamped.

Undermining renewables

By eliminating that provision, however, solar advocates and others think it will remove pressure to come up with a less expensive system of promoting solar, a move that will undermine the renewable-energy market.

In addition, Lyle Rawlings, another solar developer, argued the latest version of the bill will reduce the solar sector, which employs about 7,000 people, by 40 percent.

For now, that prospect seems remote. Sweeney seemed to rule out further changes to the bill, scheduled for a vote by the full Senate on Monday.

“I’m done,” he told reporters after the hearing ended. “We made a lot of compromises. It’s time to pass the bill.”

Sweeney blamed the controversies swirling around the bill on the green provisions advocated by the governor’s office. “It’s part of the negotiations with the governor’s office. We probably could have had unanimous bipartisan support with the original bill.”