The global coronavirus pandemic has thrown the importance of safe, reliable and affordable electricity into sharp relief.
Electricity is the backbone of our daily lives and powers digital connections as we must physically distance ourselves. It is essential for emergency services and hospital workers racing to save lives.
As the people of New Jersey face economic uncertainty and financial hardship, they can hardly afford another hike in their power bills. But rather than continuing to seek reliable power at the least cost, state leaders recently announced they are considering a drastic, costly path that would overturn years of progress for power prices, consumers and our environment.
Moving away from competitive power market
Recently, the New Jersey Board of Public Utilities said it is considering abandoning the competitive electricity market run by grid operator PJM Interconnection — a system that has delivered annual cost savings of $3.2 billion to $4 billion to customers across the footprint and slashed carbon emissions by 34% since 2005.
We urge New Jersey leaders to make a rational, informed decision before trying to go it alone. There has been no evidence that the Fixed Resource Requirement (FRR) could more quickly meet clean-energy goals than a competitive market — and certainly not at a lower cost to consumers.
This comes in response to a Federal Energy Regulatory Commission directive that encourages competition among power generators to deliver the best results for consumers. Existing projects will continue, and the ruling will not raise prices nor block low-cost renewable-energy development, according to market experts and renewable developers.
Leaving the PJM capacity market, however, would be an expensive mistake. New Jersey families and businesses would suffer, and proposed alternatives may not accelerate clean-energy goals or achieve the meaningful wide-scale emissions reductions needed to effectively combat climate change.
For example, PJM’s Independent Market Monitor, an economist who serves as the impartial “umpire” charged with evaluating PJM’s markets and prices, ran the numbers of leaving PJM in Illinois. He estimated that pursuing the FRR option would raise costs by more than $414 million in one year in northern Illinois alone, in addition to the more than $925 million Exelon would receive in annual subsidies for its aging nuclear plants if current models are replicated.
No motivating reason
There is no pressing concern for consumers or clean energy that warrants this drastic action. The Market Monitor says prices in PJM’s next auction are not likely to go up. And given that onshore wind and solar projects are cost-competitive and getting cheaper, those resources should be able to clear the market without subsidies — without handouts paid for by taxpayers and customers.
All stakeholders involved in PJM’s plan to implement FERC’s ruling, including the wind and solar industries, applauded the proposal. The American Wind Energy Association stated that the plan “provides the flexibility necessary for renewable resources to demonstrate that they are among the lowest cost and most reliable sources of capacity available today.”
EPSA and our member companies, which own, operate and invest in more than 3,800 megawatts of power in New Jersey, including solar capacity, share the goal of improving our environment. But we also know that goal doesn’t have to come at the expense of customers and raise costs for financially strapped homes and businesses.
Those urging New Jersey leaders to abandon PJM do so because they seek to corner the market and secure higher profits and shareholder returns for their aging, expensive nuclear plants. Just last year, state officials delivered subsidies worth $300 million a year to already profitable nuclear owners. This deal amounts to state leaders taking money out of the pockets of New Jersey families and businesses and placing it right in the hands of powerful energy companies.
The alternative that is being proposed comes at exactly the wrong time for the people of New Jersey. We can have cleaner, affordable reliable power. We should support the growth of renewable, low-cost technologies like wind and solar. But using competition to achieve those goals — not a fixed contract between a politically powerful utility and the state government — will ensure New Jerseyans aren’t forced to foot an unnecessarily higher bill.
Keeping market fair and open
A fair, open market that allows all power generators to compete has delivered two decades of consumer benefits, increased efficiency and encouraged innovation. In the next decade, we can seize competition and competitive markets to drive deep decarbonization through mechanisms such as carbon pricing.
Now is not the time for New Jersey to make a rash decision that will fundamentally disrupt our power systems, raise customer costs, and threaten reliability when our nation already faces so many other challenges. Even worse, it may not allow New Jersey to sustain its zero-carbon, clean-power goals over the long term. As America’s competitive power suppliers, we look forward to working with New Jersey leaders and clean-energy advocates to build a durable regulatory framework for sustainable environmental progress. That’s the better path for consumers and our environment.