The state should deny $300 million in ratepayer subsidies to PSEG Nuclear and Exelon Generation as the two companies failed to prove their three nuclear power plants in South Jersey will close without the incentives, according to a filing by the New Jersey Rate Counsel.
Rate Counsel Stefanie Brand said the two companies, in making a case for nuclear subsidies, have overstated their costs and underestimated revenues. “When their assumptions are examined closely, their claims of financial hardship fall away,’’ Brand said in a redacted filing to the state Board of Public Utilities.
The filing is among the responses received by the board on applications submitted by the two companies seeking so-called zero-emission certificates in the form of ratepayer subsidies to keep the Salem I, Salem II and Hope Creek nuclear units from closing within the next three years.
The BPU is about to begin a proceeding to determine whether PSEG Nuclear and Exelon, which owns a share in Salem I and Salem II, should be awarded the subsidies. Gov. Phil Murphy signed a controversial law last May establishing a process where the companies could seek subsidies from ratepayers to avert the closing of the units.
Broad coalition against the subsidies
The Division of Rate Counsel, among a broad coalition of business, consumer and environmental groups, opposed the bill and the award of any subsidies to PSEG during the legislative hearing. The Rate Counsel’s filing responds to an application by the companies filed late in December.
In the filing, Brand questions many of the companies’ underlying projections of future energy prices and associated costs, mostly involving operational and market risks. In essence, the filing argues the companies overstated negative outcomes while minimizing possible positive results.
“Now, with the applicants providing the best case they could make, we can see that these subsidies are not only unfair and inappropriate, they also are unneeded,’’ the filing said. “The only way the applicant could justify their request is to over-count their costs and under-count their revenues.’’
Michael Jennings, a spokesman for PSEG, said the company is confident in the accuracy of the financial and environmental data it submitted to the BPU.
“Consistent with the legislation, the documents we have provided demonstrate that the plants satisfy the requirements of the ZEC Act,’’ Jennings said. “The information submitted makes clear that the financial problems facing the nuclear plants are real and that there would significant degradation of New Jersey’s air quality if the plants were to close.’’
PSEG: Plant closures would harm environment
But Brand called the companies’ environmental assumptions unrealistic. If the plants closed, PSEG contended they would be replaced by natural-gas units, jeopardizing the state’s efforts to reduce greenhouse-gas emissions and other air pollutants, including ground-level ozone.
Those assumptions, however, ignore the state’s initiatives to promote offshore wind, solar and energy efficiency, according to Brand. Indeed, when signing the nuclear bill, the governor also signed a clean-energy bill that significantly ramps up state policies to develop renewable energy and get customers to reduce their energy use.
Jennings noted the nuclear plants in South Jersey produce approximately 90 percent of the state’s emissions-free electricity. The premature retirement of just one nuclear plant would increase greenhouse-gas emissions by 40 percent, while if all three plants shut, emissions would jump by about 75 percent, he said.
The Rate Counsel also questioned the fairness of handing out subsidies to the nuclear-power plants since ratepayers already paid $2.9 billion in stranded costs for the nuclear units when they earned “substantial profits’’ for PSEG and Exelon shareholders.
Ratepayers ‘being asked to absorb all of the risks’
“In a classic example of ‘heads I win, tails you lose,’ ratepayers are being asked to absorb all of the risks these plants may face in the future without giving any credit of the profits they made in the past or will make going forward,’’ the filing said.
In another filing, a pair of consultants retained by the Rate Counsel from Synapse Energy Economics faulted the companies’ projection of future energy and capacity prices, in part, because they failed to include any boost in future energy and capacity prices in proceedings now underway at PJM Interconnection, the regional grid operator, and possibly at the Federal Energy Regulatory Commission.
Other filings were made to the BPU yesterday, but they were yet to be posted on its website.