Rate Counsel Still Gunning for Nuclear Subsidies, This Time in Appellate Court

Tom Johnson | January 30, 2020 | Energy & Environment
Looks to court to overturn $300 million annual subsidies purportedly needed to keep PSEG’s nuclear plants in the black — and delivering zero-emission clean energy
Credit: MrTInDC
Salem and Hope Creek nuclear power plants

New Jersey’s Division of Rate Counsel is asking an appellate court to overturn an order by the state to award lucrative subsidies to three nuclear plants, a decision that bucked an agency’s own staff, its own consultant, and an expert from the regional power grid.

In the latest filings before the court, the state Board of Public Utilities (the agency that granted the subsidies), PSEG’s Nuclear LLC (the operator of the three plants) and Exelon (a partial owner) defended the award, saying they complied with a law establishing a so-called zero-emission certificate (ZEC) program to keep nuclear units open.

The court case was brought by rate counsel and others, who have argued the decision to have ratepayers subsidize three nuclear plants in South Jersey was not justified. In filings, they contended the BPU failed to justify the awarding of $300 million a year to the plants, saying the decision was not based on the extensive record before the board or criteria in the statue.

On the hook for 30 years

The ongoing litigation is significant because the Murphy administration’s new Energy Master Plan — released this week — suggests at least some of the nuclear plants will still be operating in 2050 as part its goal to achieve 100% clean energy. That means ratepayers could possibly be on the hook for at least some subsidies for another 30 years.

The subsidies were approved by the BPU in April 2018, not long after a bill creating a ZEC program was approved by lawmakers after a controversial fight, including with Gov. Phil Murphy. Without the financial incentives, PSEG had threatened to close the units, which now provide about 94% of the carbon-free electricity in New Jersey.

In a filing, Rate Counsel director Stefanie Brand dismissed arguments by PSEG and Exelon Generation, particularly over the latter’s contention the rate set for ZECs by the Legislature could not be reviewed by court — even if it turns out to be ‘’unjust and unreasonable,’’ a provision built into decades of utility regulation.

“Lost in their arguments is that the board’s order forces all New Jersey utility customers to pay $900 million over the next three years to private unregulated companies to enhance their profits,’’ Brand said in her brief.

In addition, Brand took issue with the BPU’s decision to ignore the analyses of its staff, the board’s consultant and the PJM Independent Market Monitor, all of whom claimed the plants are profitable. Even if the BPU disagreed with those analyses, it failed to explain how it came to arrive at granting the subsidies.

Getting to the bottom of the bottom line

The BPU argued otherwise in a filing. “It recognized that each nuclear power plants fuel diversity, air quality benefits and other environmental attributes were at risk of loss because the plant was projected to not fully cover costs and risks and that the plants would cease operation within three years unless credits from the Legislature were authorized.”

In its filing, PSEG argued the court’s review of the administrative agency’s action is limited, citing past court cases deferring to the expertise of various state agencies. It also defended the board’s implementation of the law passed by the Legislature.

“It was not for the board to second guess or ignore the Legislature’s judgment, but it was obligated to implement the Act based on its plain language and intent,’’ according to the PSEG brief.

In its brief, the company also argued the ZEC program is by far New Jersey’s cheapest clean-energy program, far less costly than solar and offshore wind programs. The ZEC program will end up boosting bills by $10 a megawatt hour, compared to the cost of solar at $216 per megawatt hour over the five-year period ending in 2018 and projected cost of $46 per megawatt hour for a new offshore wind project.

But critics of the ZECs still called them a mistake. Steve Goldenberg, a lawyer representing the Large Energy Users Coalition, described the subsidies awarded by the BPU as a “regrettable act of regulatory capitulation,’’ despite the absence of record in supporting the decision.

“The commissioners’ statements evidence the majority also was not satisfied the amount of the rate subsidy, dictated by PSEG, was just and reasonable,’’ Goldenberg said in his brief.