Without new subsidies proposed by the state, PSEG will shut down the three nuclear plants it operates in three years, an executive of the company said yesterday.
PSEG, which pushed a controversial bill to prop up its nuclear units in South Jersey this spring, vowed to open its books to meet the requirement that the plants will be retired unless it wins the incentives.
The company plans to seek the subsidies, dubbed zero emission certificates (ZECs), for the Hope Creek, Salem I, and Salem II plants, according to Joseph Accardo, deputy general counsel of PSEG. If granted, the subsidies will boost ratepayers bills by $300 million a year, with $100 million going to Exelon, a part owner of the Salem plant.
Accardo spoke yesterday at the opening of hearings in Hackensack by the New Jersey Board of Public Utilities on establishing how the agency will select what nuclear plants, including possibly some outside of the state, will win subsidies to keep them afloat.
“The ZEC law’s purpose is clear and well-defined to prevent the retirement of at-risk nuclear generating plants essential for the welfare of New Jersey residents,’’ Accardo said.
Bitter legislative row
To be eligible for the subsidies, the law requires an officer of the applicant plant to certify that the plant will retire within three years absent significant financial changes, Accardo said. PSEG will submit such financial information, he said.
The process was established in a bill signed after a bitter legislative fight this spring over whether the nuclear plants required the subsidies to remain open. If the plants close, the power to replace the units will spike customers’ bills and derail efforts to fight climate change, according to PSEG and its proponents.
But opponents argued the company failed to demonstrate during the legislative debate that the plants were not profitable. Scrutiny of the plants’ economics is likely to be the most contested part of the current proceeding, which is not expected to conclude until next April.
Rate Counsel director Stefanie Brand noted the plants earned substantial profits after the state deregulated parts of the energy sector and were free to keep those profits.
Desires or needs?
“As a result, the ZEC program should not be based on desired earnings, but on the minimum reasonable operating income necessary to keep the plant open,’’ Brand said.
Brand argued the BPU also must take into account the returns achieved by other business ventures owned by PSEG. Its regulated utility has been the major engine in the overall company’s profits in recent years.
Once the agency receives financial information about the plants, Brand said the state should do the analysis on a unit-specific basis. If one of the nuclear units shuts down, it will likely increase prices the other two units obtain for power from those plants, she argued.
Dean Murphy, a consultant for the Brattle Group, argued that if the nuclear units close, they would likely be replaced by fossil-fuel plants that would spike ratepayer bills by $400 million.
Reason to be worried…
But Brand noted renewable power sources accounted for more than half of the new generation in the U.S. last year. “So an assumption cannot be made that if a nuclear plant shuts down, it will be replaced by a natural gas or coal plant,’’ she said.
“Residents have a reason to be worried,’’ said Evelyn Liebman, director of advocacy for AARP NJ. “We are already saddled with some of the highest electricity rates in the nation and this $300 billion rate hike is not the only price hike on the table.’’
Public Service Electric & Gas last week submitted a $4 billion plan to help achieve the Murphy administration’s clean-energy goals. It also has a $2.5 billion filing before the BPU to modernize and strengthen its power grids.