New Jersey on Monday appealed a federal order that would raise the price of renewable fuels used for power generation, saying the measure would slow the switch to clean energy and exceed federal authority.
The state Attorney General’s Office and the Board of Public Utilities filed a petition for review with the D.C. Circuit Court of Appeals after the Federal Energy Regulatory Commission (FERC) said new sources of state-subsidized renewable fuels would in the future be covered by a rule that’s designed to preserve competition in the market for electric-generation sources.
New Jersey’s Division of Rate Counsel, an advocate for utility ratepayers, filed its own petition, and was joined by advocacy groups in Delaware, Maryland and the District of Columbia.
FERC’s order, published last year but not yet finalized, would mean that the price of renewables like wind and solar offered to power generators would have to reflect their actual cost of production, rather than a lower figure that was enabled by state subsidies.
The order was issued in response to the Minimum Offer Price Rule, a mechanism used by the regional grid operator, PJM, and which FERC said has become distorted by subsidies by some of the 13 states covered by the grid.
Opponents like New Jersey say the inclusion of renewables in the rule would hinder the adoption of carbon-free fuels and slow the reduction of emissions — both major goals of the Murphy administration.
‘Stacking the deck’
“From day one, the Murphy Administration has prioritized building New Jersey’s renewable energy programs, which we all recognize are critical to the state’s economy, to building clean energy jobs and to fighting back against climate change,” said Attorney General Gurbir Grewal, in a statement. “But now the federal government is trying to undo those efforts, and stack the deck in favor of fossil fuel companies instead. The federal government’s order is as unlawful as it is illogical, and today we’re challenging that action in court.”
BPU president Joseph Fiordaliso, who has previously spoken out against the FERC order, called it an “unwarranted intrusion into how states manage their retail electricity markets.” He expressed confidence that the appeals court would reverse what he called a “significant overreach” by FERC’s Republican majority.
Earlier this month, FERC denied requests by New Jersey and PJM for a rehearing on the rule.
A statement from the attorney general and BPU said FERC’s order has “tipped the scales” away from renewable fuels and toward fossil-fuel power sources. It did so by requiring that all new energy sources receiving state subsidies — representing the majority of renewable and zero-emission sources in New Jersey — are made available to the capacity market at a predetermined minimum price, the statement said.
FERC says its order reflects a need to restore competition to a market that has been distorted by the efforts of states like New Jersey to support the growth of sources like wind and solar in the early stages of their adoption.
The regulator said PJM’s so-called capacity market has become “untenably threatened” by what it called out-of-market payments by some states to support entry or continued participation by energy sources that might not otherwise be able to survive in the competitive market for wholesale electricity.
Pressure to create more subsidies
Continued subsidy by states would drive down auction clearing prices — the price at which buyers and sellers agree — and reduce revenue for fuel suppliers, increasing pressure on states to provide more subsidies, the commission said.
“With each such subsidy, the market becomes less grounded in fundamental principles of supply and demand,” the regulator said.
But environmentalists say FERC’s plan is just another form of subsidy to the fossil fuel industry from the pro-market Trump administration.
“This federal rule is nothing more than a bailout for fossil fuel generation in the PJM electricity market, which will hurt New Jersey’s clean energy economy, increase energy costs for ratepayers, and increase dangerous fossil fuel pollution in our communities,” said Jeff Tittel, director of the New Jersey Sierra Club.
Higher electric bills
According to the consulting firm Grid Strategies, the inclusion of new state-subsidized fuels in the rule would cost New Jersey $711 million a year, or an extra $4.68 a month on the average residential electric bill.
Carolyn Elefant, a Washington, DC attorney who previously worked for FERC, said New Jersey has “a decent shot” at overturning FERC’s order.
“FERC has a long history of precedent recognizing that states have exclusive jurisdiction over resource procurement and decisions regarding generation mix,” she said. “That makes sense because even though wholesale energy markets are arguably national, generation is state dependent.”
For its part, PJM said it is still considering a response to FERC’s rejection of its own request for a rehearing earlier this month. Public comments on FERC’s order are due by May 15.
The nation’s biggest grid operator said it’s trying to balance the need for market competition with the policies of states like New Jersey.
“Before drafting its rehearing request, PJM listened to the diverse views of its stakeholders, recognizing the high level of concern that was being expressed regarding the lack of accommodation for state public policy objectives and integrated utilities,” said Jeff Shields, a spokesman. “PJM believes that a sustainable balance between accommodating state interests and preserving the integrity of the market is achievable.”