Federal Agency Stands by Ruling that Could Undermine NJ’s Clean-Energy Goals

Tom Johnson | April 17, 2020 | Energy & Environment
New round of litigation expected as Federal Energy Regulatory Commission refuses to reconsider a ruling that critics say will drive up costs to consumers
Credit: anprocházka via Flickr
Transmission tower

In a setback to New Jersey’s efforts to transition to a clean-energy economy, federal energy regulators yesterday denied requests by it and other states to reconsider a ruling that critics say will drive up costs to consumers.

The Federal Energy Regulatory Commission ruling in December last year had triggered opposition from states with aggressive clean-energy goals, which fear the ruling could undermine their policies to promote cleaner sources of energy, like solar and wind power.

The rejection of the request for a rehearing is likely to spur a new round of litigation among wide segments of the energy sector, some of whom back the commission’s decision and states and clean-energy advocates who oppose it.

“We are deeply disappointed that FERC has once again sided with the fossil fuel industry rather than allow states to implement policies that best benefit their residents,’’ the New Jersey Board of Public Utilities said in a statement after the ruling. “We will fight this decision as vigorously as possible at every opportunity and we will not let FERC’s actions stand in the way of implementing Gov. Murphy’s clean energy vision.’’

The controversy reflects the volatile nature of a deregulated energy sector, which has seen power prices drop steeply for energy suppliers in recent years, creating increasing vulnerability to traditional generators, most prominently coal-fired, nuclear plants, and even natural gas plants.

But the Electric Power Supply Association issued a statement that argued the ruling upholds fair competition in the largest power market in the United States. “This is a step toward resolving concerns surrounding state goals and regional power markets,’’ said Todd Snitchler, president and CEO of the Electric Power Supply Association.

The issue revolves around how the nation’s largest regional power grid, the PJM Interconnection, buys power for the 65 million customers in its region from the Eastern Seaboard to Illinois to ensure there is enough electricity to keep the lights on.

In recent years, states have been making the transition to cleaner sources, like solar and wind power, which has led to subsidies for those efforts — policies that traditional fossil fuel advocates say distort competition in the so-called capacity market.

A bone of contention

It has been a particular bone of contention for New Jersey and the BPU, which has argued that capacity prices are far more expensive for consumers than in other sections of PJM. The BPU last month initiated an investigation into how to deal with FERC’s December ruling.

In its statement yesterday, the BPU noted it recently opened an investigation, which will evaluate alternatives to the state’s participation in the regional capacity market administered by PJM. The probe is essentially a reflection of the state’s increasing sense of influence on decisions by PJM and FERC that have resulted in higher energy bills for consumers.

“In largely rejecting this rehearing request, FERC is undermining PJM’s competitive market and is standing in the way of state’s ability to choose low-cost clean energy,’’ said Katherine Gensler, vice president of regulatory affairs of the Soar Energy Industries Association.

Paul Patterson, an energy analyst with Glenrock Associates, was not surprised by the decision, however. “This is not new. What’s new is this is the latest iteration of a trend that aims to see higher prices. It’s been consistent with FERC — they seem to be predisposed to have higher prices,’’ he said.

The decision is likely to spur litigation among all of the players in the sector, Patterson said. “This is going to be the full employment act for lawyers and consultants,’’ he said.

Others said it could impact New Jersey’s efforts to promote cleaner sources of energy. “This is a blow against offshore wind,’’ said Jeff Tittel, director of the New Jersey Sierra Club. “It is going to cost ratepayers to subsidize fossil fuels instead of renewable energy,’’ he said.