Power-buying policy still an open question in NJ

Presidential election may impact rules state says loom large over its green-energy plans
Credit: (AP Photo/Michael Probst, File)
Both major presidential candidates have sizable differences in their energy policies.

With a crucial national election less than a month away, the state is still far from reaching a decision on how it goes about buying electricity for utility customers, a policy that has big implications for the Murphy administration’s clean-energy agenda.

In March, the state Board of Public Utilities begin looking into what it could do to ensure new federal policies did not undermine the state’s goal of transitioning to 100% clean energy by midcentury. At the time, it was expected that commissioners could make a decision on the policy change by the end of the year.

That now seems unlikely as power suppliers, consumer advocates and clean-energy supporters have been unable to agree on much of anything, other than the fact that the ultimate decision could have a hefty impact on what consumers pay for the power they need.

Election outcome and NJ clean energy

But the issues could change, however, since both major presidential candidates have sizable differences in their energy policies.

The situation began because New Jersey and other states were upset with an order issued last December by the Federal Energy Regulatory Commission, which critics argued backed fossil-fuel generation at the expense of renewable energy, such as solar and offshore wind. Under a new Energy Master Plan, solar and offshore wind would account for more half of New Jersey’s electricity by 2050.

Over the past six months, participants debated various options, including have the state leave the PJM Interconnection capacity market, where utilities buy the reserve power needed to keep the lights on. Other alternatives included creating a statewide power authority or establishing a Clean Energy Standard, where energy suppliers commit to securing a higher percentage of clean energy.

The option that drew the most attention, and possibly criticism, was advanced early on by the Public Service Enterprise Group/Exelon, the owners of three nuclear power plants in South Jersey. In that proposal, the companies suggested exiting the PJM capacity market to set up an entity for buying power to serve customers in New Jersey, an option known as the Fixed Resource Requirement.

What’s the bottom line?

The Fixed Resource Requirement could lower costs to consumers by hundreds of millions of dollars a year while allowing increased purchase of renewable energy, according to the companies. If adopted, they would give up $300 million in annual ratepayers’ subsidies in New Jersey, an offer that quickly drew skepticism from critics who wondered what the new system would cost if the companies were willing to give up the subsidies.

According to a statement from the company, “PSEG believes that the New Jersey Board of Public Utilities should consider multiple FRR procurement approaches. With that in mind, PSEG offered a few potential approaches for the Board to consider with its consultants in our comments throughout the Board’s investigation of different FRR alternatives. We look forward to discussing all of the proposals with the Board, its consultants and stakeholders.”

In the latest comments submitted by PSEG, the company acknowledged that the proposal would require changes in state law, a process that would take too long to remedy the problems caused by the changes made by FERC. PSEG, and others, argue the new ruling by FERC could begin costing consumers tens of millions of dollars a year if the state does not find a way to comply with the ruling as it would under a Fixed Resource Requirement option.

“Thus, in the interest of time, we have chosen to focus instead on approaches that are within the board’s existing authority,’’ said Kenneth Carretta, deputy general counsel for PSEG. The company continued to argue, however, the Fixed Resource Requirement option could be designed to fulfill the board’s objectives, including lowering costs to consumers.

‘Green’ gets behind FRR

That kind of option also drew support from three major environmental groups — Earth Justice, the Sierra Club and the Natural Resources Defense Council. They argued it is the only proposal on the table that ensures the state will have the energy resources it needs and addresses the harm imposed by the new ruling by FERC.

But some energy suppliers argued otherwise, citing comments at a recent conference on the issue. “The overall consensus expressed at the conference was that FRR was not the right path for New Jersey,’’ said Glen Thomas, on behalf of the PJM Power Provider Group, an organization of power suppliers.

He and others urged the state to pursue efforts to establish a price on carbon as the best market-based means to achieve carbon reductions in the power sector.

New Jersey Rate Counsel director Stefanie Brand said the state should move cautiously if it decides to adopt the FRR option. “The rules … are complicated and are subject to changes, exposing the FRR entity and ratepayers to the risk of significant penalties,’’ Brand said.