BPU Comes Up with Game Plan for Deciding if Nuclear Plants Qualify for Subsidies

Board also opts to give Rate Counsel and PJM monitor access to operator’s confidential financial data indicating if nuclear plants running in the red or the black

nj nuclear
A state agency made a couple of significant decisions yesterday about whether ratepayers should subsidize nuclear power plants, including ruling on how large the financial incentives utility customers will have to pay for the next three years if they do.

In its monthly meeting in Trenton, the New Jersey Board of Public Utilities approved the details of how it will review and determine which nuclear plants, if any, qualify for subsidies of as much as $300 million. They also determined who will get to intervene to contest those awards in what is sure to be a contentious process.

The proceeding, mandated by a law signed by Gov. Phil Murphy this past spring, is aimed at propping up nuclear power plants that have faced economic challenges caused by competing with cheap natural gas. The legislation was pushed by Public Service Enterprise Group, which threatened to close its three nuclear units in South Jersey if it did not receive financial incentives.

Welcoming skeptics into the circle

The implications of the board’s actions are twofold. First, they will guarantee that two prominent skeptics of awarding such large subsidies to nuclear power units are part of the decision process. Second, and perhaps more importantly, those skeptics will be given access to confidential financial data about the economic viability of those plants.

The two intervenors, the New Jersey Division of Rate Counsel and the independent market monitor for PJM, have repeatedly questioned whether the plants are unprofitable. Other critics of the subsidies, however, were denied intervenor status, a ruling that prevents them from reviewing the applicants’ finances, primarily operations and maintenance costs and capital expenses.

BPU OK with tariff rate

In another key ruling, the BPU approved tariff rates the state’s four electric utilities and a municipal electric provider will charge their customers if it decides to award any nuclear units a subsidy. The rate is established in the legislation at $0.004 per kilowatt hour, a charge that could cost customers up to $300 million a year over three years by most estimates.

That decision, according to critics, means that if the board determines a company qualifies for a subsidy, it can only award the full $300 million for the first three years — even if the plants need significantly less to remain open.

Stefanie Brand, director of Rate Counsel, had argued in a brief submitted by her office that established utility law mandates the board can only approve “just and reasonable rates.’’ That provision would allow the state to adjust the specified legislative rate depending upon the actual economic circumstances of the plant.

But BPU president Joseph Fiordaliso said the agency had no choice but to follow the mandates of the rate set by the legislation. “We’re going with the law. That what’s the law says,’’ he said, although not ruling out seeking a remedy from legislators farther along in the process.

Other critics speak out

Others were more critical. “Even if the board wants to compromise, their hands are tied to the rubber stamp in the legislation,’’ said Jeff Tittel, director of the New Jersey Sierra Club. “BPU’s approval of a rate hike solidifies that the fix is in for the nuclear subsidy.’’

By its actions, the board opens up the application process for nuclear plant operators, including those from out of state, to seek the subsidies. The deadline closes December 19, and the board expects to make a decision on what, if any, subsidies to award at its meeting in mid-April.

“I assure you that anyone gets that subsidy proves that they need it,’’ Fiordaliso said after the conclusion of the meeting. PSEG executives said they plan to file for the subsidy sometime in December.

Brand said she was happy the board granted her intervenor status, an issue hotly argued during the long legislative debate over the nuclear subsidy bill. “We thought we were always entitled to it from the beginning,’’ she said.

With Rate Counsel’s office and the independent market monitor, there will be strong advocates representing consumers’ interests. Last month, Joseph Bowring, president of Monitoring Analytics, LLC, said in a brief “the PSEG units are economic and expected to be economic in the foreseeable future based on market data.’’

The board granted participant status to four other organization: the New Jersey chapter of the AARP, New Jersey Large Energy Users Coalition, PJM Providers Group, and NRG Energy. They will not have access to the confidential financial data.