Rate Counsel Challenges Nuclear Subsidy in Appellate Court

The amount of the surcharge, which PSEG helped determine, likely to be a linchpin in the proceedings

salem nuclear power plant
As expected, Rate Counsel Stefanie Brand yesterday challenged the award of $300 million in ratepayer subsidies to keep PSEG Power’s three nuclear power plants open in South Jersey in a case filed with the New Jersey Appellate Division.

The subsidies, dubbed zero-emission certificates, were given to the plants last month by the state Board of Public Utilities, a decision that ignored the recommendations of Rate Counsel, the BPU’s own staff, and an outside consultant retained by the BPU. All three concluded the plants failed to meet the financial threshold to qualify for the subsidy.

The debate over the nuclear bailout is one of the more contentious issues to come before the BPU in recent years. The scheme was opposed by some environmental groups and many business interests who argued it would drive up energy prices in a state already hit by high energy costs.

No danger of shutting down

In her filing, Rate Counsel argued the commissioners, in a 4-1 split vote, awarded the subsidies despite a six-month analysis that failed to demonstrate the plants were in danger of closing and were, in fact, profitable.

Besides deeming the award arbitrary and capricious, Brand contended the rate set in legislation establishing the ZEC program is not just and reasonable, a standard set for all rates set by the BPU.

Indeed, even a couple of BPU commissioners, in approving the subsidies in April, expressed misgivings about a provision in the legislation that required them to award the entire $300 million — even if all that was not needed to keep the plants open.

A spokesman for the BPU declined comment, saying the agency does not discuss pending litigation. BPU president Joseph Fiordaliso also declined comment, when asked by an assemblyman to explain why the board approved the subsidies during a budget hearing yesterday.

PSEG has no problem with decision

Michael Jennings, a spokesman for PSEG, defended the subsidies. “We believe the BPU’s decision was proper,’’ he said. “PSEG Nuclear demonstrated through its applications that the Salem 1, Salem 2, and Hope Creek nuclear plants fully met the criteria set forth in New Jersey’s ZEC Act.

The BPU decision came after more than two years of public debate that confirmed the many significant benefits the nuclear plants provide New Jersey, Jennings added. Those discussions included setting the dollar value of the ZECs.

That issue is likely to be the focus of the appeal. Earlier this year, Sen. Bob Smith, one of the lawmakers who drafted the bill, told the Star-Ledger he came up with the 0.004 kilowatt per hour surcharge after being told by PSEG’s CEO and chairman it was the right number.

The surcharge is expected to have a modest impact on residents’ electric bills throughout the state, pushing up yearly costs by as much as $41. For business and industrial customers, the cost is much more significant, costing some large energy users as much as $1 million a year or more.

PSEG’s three nuclear units produce 90 percent of the carbon-free electricity in New Jersey. If the plants closed, even critics of the subsidy acknowledge it would be difficult for the state to achieve ambitious goals for reducing greenhouse-gas emissions that contribute to climate change.

Other states also have decided to subsidize nuclear power plants to avert their closing. So far, subsidies in other jurisdictions like New York and Illinois, have survived judicial scrutiny.