Will NJ Consumers End up on Hook for Transmission Line to Other States?

Tom Johnson | March 7, 2019 | Energy & Environment
FERC’s decision not to rehear cost allocations for $278 million power line could hit Garden State ratepayers right in their wallets

PSEG Power's nuclear generating facility on Artificial Island
New Jersey ratepayers may end up paying a bigger share of the cost of a controversial transmission line to deliver power from the state’s three nuclear power plants to customers in Delaware and Maryland.

The Federal Energy Regulatory Commission last week denied a rehearing request filed by two New Jersey regulatory agencies over FERC’s allocation of costs for a $278 million power line from the nuclear units at Artificial Island operated by PSEG Nuclear to Delaware.

The decision disappointed New Jersey officials, but marked a victory for mid-Atlantic states, which would have assumed more than 90 percent of the costs of the project under the original allocation formula. Instead, customers of New Jersey’s four electric utilities will now be picking up roughly 40 percent of the costs.

Thwarted effort to hold down costs

The federal agency’s decision marks the latest setback in New Jersey’s efforts to rein in costs associated with new high-voltage transmission lines, a lucrative part of the utility sector as it aims to modernize an aging power system.

“The FERC decision is an unjust result that forces New Jersey ratepayers to unreasonably pay for a project that benefits other states,’’ said state Board of Public Utilities President Joseph Fiordaliso, who has emerged as a fierce critic of both PJM and FERC since appointed in 2017.

New Jersey Division of Rate Counsel Stefanie Brand, who joined the BPU in seeking a rehearing on the disputed allocation of costs, agreed. “The bottom line means we’re going to pay more for that line,’’ she said, noting costs continue to mount for the state’s utility customers.

With the state embarking on an aggressive effort to transition to a clean-energy economy, the policy has led to a growing list of proposals by utilities to invest in projects to strengthen the power grid, switch to cleaner ways of producing electricity, and reduce energy use. “It’s really starting to add up,’’ Brand said.

The topic of who should pay for the transmission line has emerged as a relatively unpublicized side issue to PSEG’s bid to win financial incentives to keep the plants open, which provide power to about 40 percent of New Jersey. Without subsidies, Public Service Enterprise Group, the parent, has threatened to close the units.

PSEG Nuclear is currently seeking incentives from the state to keep the power plants open, saying the company cannot afford to keep them open without financial help. The proposed incentives would involve up to $300 million annually, to be paid by New Jersey ratepayers.

NJ subsidizing other states

The proposal, now before the BPU and expected to be acted on some time next month, has been criticized by Brand as unnecessary. Others have argued it could lead to New Jersey ratepayers subsidizing power to customers in other states. But other states have moved to avert nuclear facilities from closing, citing their value in producing carbon-free electricity.

The nuclear bailout program led to huge spending by lobbying groups either supporting or opposing subsidies for the units, with more than $5 million worth of expenditures in 2018, according to reports from the Election Law Enforcement Commission.

Public Service Electric & Gas, a sister company to PSEG Nuclear, also opposed the move by FERC to shift the allocation of the new transmission line. “Neither the recent order nor the process used to arrive at it is in the best interest of PSE&G’s customers,’’ the company said in a statement.

The project, ordered by the regional grid operator PJM Interconnection, has been the source of a huge battle ever since it was approved in 2015, a transmission line designed to address concerns about stability of the electricity supply needed to meet customer demand.

The largest dispute centered on who should pay for it. Originally, the bulk of the cost was allocated to Delaware and Maryland, but they contested the allocation, arguing their residents receive few benefits from the project. Their arguments eventually prevailed before the federal agency.

The project was the first such proposal to be bid out competitively among various players in the energy sector in the region.