Amid Arguments and Warnings, Nuclear Subsidy Bill Clears Committee

Tom Johnson | April 6, 2018 | Energy & Environment
Clean-energy measures also voted out, but nuclear bill looms large — particularly when it comes to costs to ratepayers

Salem nuclear power plant
After months of contentious debate and false starts, a package of bills increasing the state’s reliance on renewable energy, as well as subsidizing nuclear power plants, won approval yesterday from a pair of legislative committees.

The passage sets the stage for final approval by both houses on Thursday to legislation that likely will impose billions of dollars in new costs on utility customers to support those programs.

If signed into law by Gov. Phil Murphy as expected, the measures will begin implementing key parts of the new administration’s clean-energy agenda, while averting the threatened closing of nuclear power plants, operated by Public Service Enterprise Group.

The issues range across multiple trends, roiling the energy sector, including cheap natural gas that has made other conventional sources of electricity less viable (mainly coal and nuclear), along with emerging, competitive sources of cleaner energy, such as solar and wind power.

Prepared to make difficult decisions?

The mounting public demand to address climate change and the difficult choices facing an unregulated energy sector have thrust those decisions before a Legislature largely oblivious of the implications of its actions, according to some. A key provision of the deal calls for subsidizing PSEG’s three nuclear power plants for as long as 10 years at a cost of $300 million annually.

“The proposed nuclear bailout will make it difficult to ramp up a clean-energy future,’’ argued Doug O’Malley, director of Environment New Jersey, who backed a clean-energy bill.

The nuclear bill (S-2313) has proven very controversial due to its cost. Critics, including many business groups, consumer advocates, and environmentalists, argue the company has never demonstrated the plants are in financial jeopardy.

No room for rate counsel

Under the bill, the plants would only be awarded the subsidies in certain circumstances. The state Board of Public Utilities would have to initiate a proceeding and find the plants are in financial distress. But the bill may leave the state’s Division of Rate Counsel, the agency representing consumers, out of the review process.

Rate Counsel director Stefanie Brand said the subsidies could end up costing consumers more than $3 billion over a decade, even though the company has not proved they are losing money. “They are making money, but not as much as the company wants,’’ Brand told the Senate Budget Committee.

Ralph Izzo, chairman, president, chairman, and CEO of PSEG, said the threat of nuclear plants closing is real, citing last week’s announcement by FirstEnergy Corp. that it is closing three such units in Ohio and Pennsylvania.

Others argued the plants’ closing would have a devastating impact on South Jersey, hinder the state’s efforts to deal with climate change, and end up boosting prices to consumers for replacing the 40 percent of power provided by the units.

Rivals in the sector had another take. “It is abundantly clear by now that ratepayers cannot afford a multibillion dollar tax hike, paid to bail out demonstrably profitable nuclear plants, just so PSEG shareholders can make some money,’’ said Matt Fossen, of the New Jersey Coalition for Fair Energy.

Unconstitutional subsidies

It is not the first time lawmakers here have proposed huge subsidies for power plants. During the Christie administration, the governor and Democratic-controlled Legislature embraced subsidies to incent new natural gas-power plants to be built here.

The proposal, contested in court by an array of power suppliers, including PSEG, won the case in the Supreme Court, which declared the subsidies unconstitutional. Subsequently, at least four new natural gas plants were built here, including one by PSEG Power, without any subsidies.

Otherwise, the Senate panel heard many of the same arguments — pro and con — advanced by many of the same players in the numerous previous hearings before legislative committees. In the Assembly Budget Committee, testimony on the two big bills, the nuclear subsidy measure and a comprehensive clean-energy bill, was much more limited.

In the end, the nuclear bill won approval from both committees, while Republicans balked at what they viewed the high costs the clean-energy measure would impose on consumers.

“This is about an industry, not one company,’’ said Sen. Paul Sarlo (D-Bergen), the chairman of the Senate committee, in moving the nuclear bill forward.

The clean-energy legislation (A-3723) would scale up the state’s reliance on renewable energy, requiring half of the state’s electricity come from clean energy by 2030. It would ramp up the state’s solar program, increasing costs by about $430 million over the next decade, according to Brand.

Mandates to decrease energy consumption and promote community solar projects also will boost costs to ratepayers. The legislation won strong backing from a wide array of environmental groups, who argued the measure would put the state on a path to achieving Murphy’s goal of having 100 percent clean energy by 2050.

“The clean-energy bill will create jobs, cut pollution, and set New Jersey on a path to becoming a national clean-energy leader once again,’’ said Mary Barber, director of New Jersey clean energy for the Environmental Defense Fund.

Both committees finally approved identical legislation (A-2485) aimed at reviving the Fishermen’s Energy offshore-wind project, which was rejected by the Christie administration on two occasions. The 24-megawatt pilot project would be constructed about three miles off Atlantic City.