PSEG Nuclear yesterday became the first nuclear plant owner to seek hundreds of millions of dollars in ratepayer subsidies to keep its three generating units in South Jersey open.
In a voluminous filing with the New Jersey Board of Public Utilities that filled nearly 200 boxes, the company is seeking to be awarded so-called zero-emission certificates, which are subsidized by a surcharge to be added to all utility customers’ bills. The filing could cost $300 million a year over the next three years, if approved.
After business hours yesterday, no other company had filed an application with the BPU to qualify for the subsidies, according to a spokesperson for the agency. Nuclear plants outside New Jersey are allowed to seek the credits under the law.
The proposed subsidies are part of a measure signed by Gov. Phil Murphy last spring after a bitter legislative battle that Public Service Enterprise Group, the parent of PSEG Nuclear, mounted to prop up its nuclear plants. Without new financial incentives, the company argued the plants faced the prospect of closing.
PSEG claims closing plants would spike bills
Nationwide, six nuclear plants have closed prematurely in recent years as they faced steep economic challenges stemming from cheap natural gas in a competitive energy marketplace. If PSEG closes its plants, consultants for the company contend they would be replaced by fossil-fuel units that would spike ratepayer bills by as much $400 million.
But critics of the proposed subsidies have argued that PSEG has yet to provide any information that its plants are not profitable. Those arguments have been fortified by Joseph Bowring, the independent market monitor for PJM, the operator of the nation’s largest power grid.
Bowring has been granted intervenor status in the PSEG case, which allows him access to the company’s confidential financial data. Using only publicly available data, Bowring found in a recent PJM status report on the market that only a few nuclear units were facing economic shortfalls.
PJM argues PSEG plants are in the black
His analysis projected the two Salem units and Hope Creek plant in South Jersey would more than cover annual costs and capital expenditures, estimating profits for the company in 2018 from the facilities at $285 million — with continued surpluses through 2021.
In a phone interview, Bowring said his analysis shows that through the first three quarters of 2018, energy prices within PJM increased by more than 30 percent, compared with the same period in 2017.
“The whole hysteria about nuclear energy is tied to 2016,’’ said Bowring, a time when energy prices in PJM — a region stretching from the Eastern Seaboard to Illinois — were at the lowest level since the energy markets were opened to competition in 1999.
“It’s total nonsense. Power prices have rebounded and energy prices are up,’’ Bowring said. PSEG declined to comment on Bowring’s assessments. The profitability of the nuclear plants is going to be the focal point of the BPU proceeding, but it will be a process rarely glimpsed by the public. PSEG declined comment, other than acknowledge it filed an application.
Other than Bowring, only the New Jersey Division of Rate Counsel and a consultant retained by the BPU have been granted intervenor status in the proceeding; all three are required to keep confidential financial information private.
What the public won’t see
“I’d be surprised if the public gets a look at what this will cost until the board makes a decision,’’ Bowring said.
The BPU on Tuesday hired a consultant to help guide it through the process, Levitan & Associates, a Boston-based energy consulting firm. Levitan was hired by Connecticut to review efforts by Dominion Energy to win state subsidies for its Millstone nuclear plant. It found the facility is likely to remain profitable through 2035 — even with low natural-gas prices. The Millstone plant, however, may still win subsidies from the Connecticut.
The PSEG issue will be debated during a lengthy proceeding before the BPU that is expected to conclude in April. To be eligible for the subsidies — likely to be divided between PSEG and Exelon, a part owner of the Salem units — the company must demonstrate the plants will be retired within three years if they do not receive financial help.
The case will be closely scrutinized by the business community, which uses much more energy than the average household and will be more adversely impacted by any subsidies that are granted.
“You can’t have taxpayers turning over $900 million (over the next three years) to a company that is shown to be profitable,’’ said Dennis Hart, executive director of the Chemistry Industry Council of New Jersey.
Whatever decision the BPU makes is likely to lead to litigation, given the volatility of the energy sector.