PSEG, Exelon Suspend Funding for Capital Projects at Salem Nuclear

SEC filing says money will be restored when controversial nuclear-subsidy bill - which could cost utility customers $300M a year - is ratified

Salem nuclear power plant
With legislators revisiting a bill to subsidize nuclear power, the co-owners of the Salem nuclear plant in South Jersey will no longer fund capital projects at the generating station.

The announcement, made in a filing to the Securities and Exchange Commission Friday, comes in the wake of the Senate last week postponing a vote on a controversial measure that could have utility customers pay $300 million a year to prop up plants owned by Public Service Enterprise Group and Exelon.

The legislation (S-877) is being pushed by the companies, which have threatened to close two Salem nuclear units and the Hope Creek nuclear station if they do not win financial incentives to keep them open. In a further complication, the bill has been tied to other lucrative subsidies to advance Gov. Phil Murphy’s clean energy agenda.

Ramping up pressure

The decision to suspend new investments at Salem is viewed by opponents of the bill as an attempt by PSEG to ramp up pressure on lawmakers to act on the bill. The spending suspension affects neither actions required by the Nuclear Regulatory Commission nor investments needed to ensure the units safe operation, according to the filing.

“It’s more about politics than capital investments,” argued Jeff Tittel, director of the New Jersey Sierra Club, which opposes the bill. “It is part of their strategy to get billion dollars in subsidies.

“They should stay at the table and not use this kind of brinkmanship,” agreed Ed Potosnak, executive director of the New Jersey League of Conservation Voters.

Funding restored when subsidy OK’d

In its filing, PSEG and Exelon said funding for the projects would be restored when and if legislation is enacted in New Jersey that “sufficiently values” the attributes of nuclear energy. Salem is part of a complex that provides nearly 40 percent of the state’s power and more than 90 percent of New Jersey’s carbon-free electricity, according to PSEG.

The projects that are on hold include both small investments and one as large as $40 million, according to Michael Jennings, a spokesman. The company still believes the legislation will end up being passed, he said.

Ralph Izzo, CEO, president, and chairman of PSEG, expressed that optimism in an earnings call February 23 – three days before the Senate balked at passing the bill. “I have a high degree of confidence that New Jersey policymakers understand the value of these plants and will do the right thing, but of course, one cannot predict any outcome,” he said.

Paul Patterson, an energy analyst at Glenrock Associates, said of the filing that it ”seems the company thinks there is increased risk the bill may not go through.”

The measure has had an up-and-down journey through the Legislature. Initially introduced as a standalone bill to help the nuclear plants, it appeared headed for quick passage in the lame-duck session early in January, but was sidetracked by then Gov.-elect Murphy’s push to include more clean-energy items.

Many business groups oppose the bill, arguing the company has not proved its case that the nuclear plants are economically challenged. Some environmentalists contend the lucrative subsidies will undermine efforts to promote renewable energy in New Jersey, a goal of the Murphy administration.