BPU Caved When Awarding Nuclear Subsidies to PSEG, Rate Counsel Argues

Tom Johnson | October 1, 2019 | Energy & Environment
Rate Counsel files brief asserting agency ignored its own staff, independent consultant and PJM Market Monitor when deciding to award $300 million annual subsidy
Salem nuclear power plant

The state awarded subsidies to PSEG Nuclear’s three power plants in South Jersey based on threats from the company they would shut them down prematurely, rather than whether they were economically profitable, according to the Stefanie Brand, director of the state Division of Rate Counsel.

In a 61-page brief filed in conjunction with its challenge of the granting of subsidies amounting to $300 million a year, Rate Counsel argued the decision this past April to award the ratepayer subsidies to the units ignored expert testimony from the staff of the Board of Public Utilities, its own consultant, and an independent consultant for the operator of the nation’s largest power grid.

Using comments made by three of the BPU’s own commissioners in the public hearing, the Rate Counsel suggested the decision to award the subsidies overrode conclusions that the plants are profitable reached by the BPU staff, its consultant, an expert hired by Rate Counsel and the Independent Market Monitor for PJM, the operator of the regional power grid.

Playing ‘chicken’

In other words, the decision was not based on the extensive record or the criteria in the statute, but on a high stakes game of ‘chicken,’ ‘’ Rate Counsel argued in its brief, citing commissioners’ own comments at the hearing.

The issue is important because the Murphy administration is embarking on an aggressive clean-energy agenda that relies both on nuclear and on numerous clean-energy initiatives that threaten to spike customers’ bills — at least in the short term.

BPU commissioner Bob Gordon sided with agency staff, concluding that it is economically rational to keep those plants in operation but added that PSEG and Exelon, a part owner, would nevertheless shut them down because “they are not profitable enough.’’

Fellow commissioner Mary-Anna Holden was unwilling to “play the equivalent of a generation chicken game’’ with the nuclear plants, according to the filing by Rate Counsel.

Commissioner Upendra Chivukula, the lone member to vote against the subsidies, described them at the hearing as “highway robbery’’ that imposed an undue burden on ratepayers.

Gordon seemed to agree. “In my view, the board is being directed to pay ransom and the hostages are the citizens of New Jersey,’’ he said at the hearing.

Despite doubts, subsidies approved

Nevertheless, the subsidies were approved and are now being collected from customers big and small. For residents, the cost amounts to about $40 a year, but large manufacturers could pay as much as $1 million or more on their energy bills.

In its order, the board questioned whether there were enough renewable-energy resources to replace the nuclear power if the units shut down, which would end up increasing greenhouse-gas emissions in New Jersey.

PSEG has strongly defended the subsidies, saying they will ensure 90% of the state’s carbon-free electricity will be delivered to customers while helping the state’s ambitious goals to curb global-warming pollution by 80% below 2006 levels by 2050.

Indeed, the BPU already has opened a proceeding to determine whether the subsidies, dubbed zero-emission credits in bureaucratic jargon, will continue beyond three years. In a hearing earlier this month, PSEG said the financial challenges facing the units are even bigger now than when the subsidies were granted last spring.

Nuclear power, which now provides about 33% of New Jersey’s electricity, is having difficulty competing with cheap natural gas, most of which comes from plentiful nearby supplies in Pennsylvania. Besides New Jersey, New York and Illinois have approved similar ratepayer subsidies to avert closing of nuclear units.

Rate Counsel also argued in its brief that the BPU failed to ensure the subsidies would meet the “just and reasonable” standards applied to customers’ bills by earlier statutes governing utility rates.

PSEG has yet to make public its filing, but issued this statement: “Preserving nuclear is a critical component of New Jersey’s Clean Energy Future and a big step in addressing climate change,’’ according to Marijke Shugrue, a spokeswoman for PSEG. She added the BPU’s action helps keep customers’ costs down.