PSEG applies to keep $300M annual subsidies for South Jersey nuclear plants

The energy company first got the controversial ratepayer aid in 2018 after threatening it would otherwise close the plants
Credit: (AP Photo/Mark Lennihan)
File photo: Salem Nuclear Power Plant in Lower Alloways Creek Township

Public Service Enterprise Group yesterday filed an application to retain $300 million in ratepayer subsidies annually to keep its fleet of nuclear plants in South Jersey operating.

The application, filed with the New Jersey Board of Public Utilities, rekindles a dispute over whether the plants need the subsidies to remain open, a controversy still being debated in the courts, before regulators, and within the energy sector. Like the original application, the request for the subsidies includes the Exelon Corp., a co-owner of the Salem I and Salem II nuclear units.

PSEG initially won the subsidies in a 2018 vote by a divided BPU, which took that step to avoid the closing of the three nuclear units on Artificial Island in Salem County. Without new financial incentives, the company’s CEO Ralph Izzo threatened to close the plants, which supply roughly 90% of the carbon-free electricity used by customers in New Jersey.

In seeking three more years of ratepayer subsidies, PSEG officials argued the need for the financial incentives is greater than ever. “We are in a more difficult position today than when we first applied,’’ said Rick Thigpen, a senior vice president, blaming the economic situation in the wholesale energy markets, where prices have dropped.

Since 2018, three nuclear plants in the U.S. have closed, all for economic reasons, according to PSEG. “New Jersey can only achieve its ambitious clean energy goals with nuclear energy in the mix,’’ Thigpen said.

BPU has more leeway this time around

Unlike the first time, the BPU has leeway to reduce the  subsidies requested by the company. In 2018, the enabling legislation to allow incentives stipulated that the board could only approve $300 million in subsidies, or deny them — and not approve lesser subsidies.

It is likely the debate will once again feature the same cast of characters and many of the same arguments. The proceeding is likely to be decided sometime next spring, possibly in April, according to the company.

Division of Rate Counsel director Stefanie Brand said the 2018 proceeding established the plants are making money. “They are just not making as much profits as they want,’’ said Brand. The BPU’s own consultant, its own staff, and the independent market monitor (IMM) for the regional grid — PJM Interconnection — all concluded PSEG had not justified the need for subsidies. The BPU commissioners decided otherwise in a 4-1 vote.

Thigpen argued the plants still require financial incentives, saying “we believe their commercial viability requires the full subsidy.’’ That assessment will be backed up by the financial information PSEG provides to the board, he said.

Not everyone in the case will see that information. The Division of Rate Counsel and IMM will review it, but though the New Jersey Large Energy Users and the PJM Providers Group have once again been granted intervenor status in the case, they are not being given access to confidential financial information, according to a decision last week by BPU president Joseph Fiordaliso.

“For another $300 million subsidy, ratepayers should be able to see whether this bailout is warranted,’’ said Doug O’Malley, director of Environment New Jersey. “It is hard to stomach another round of subsidies going to profitable plants.’’

But Steven Goldenberg, a lawyer for large energy users, is more optimistic this time. “This proceeding will be decided on the merits, consistent with the recommendations of independent experts and the board’s staff, rather than on the basis of political influence or threats to close the nuclear plants if the companies don’t get what they want,’’ he said.

Deep public divisions

The issue is complicated by deep divisions in the public over the fate of the nation’s nuclear industry. At least six nuclear plants have closed due to competition from cheap natural gas facilities in recent years. At a time when those nuclear plants offer carbon-free electricity, some states, like New Jersey, are providing ratepayer incentives to keep them open — a policy that helps advance goals to combat climate change.

In New Jersey, that premise is not shared by some. The Division of Rate Counsel is trying to overturn the original subsidies in the state court appellate division. Oral arguments in that case have been delayed because of the coronavirus pandemic.

Meanwhile, the BPU is contemplating a plan to exit the PJM capacity market, arguing it costs too much to New Jersey consumers, while undermining the state’s efforts to promote clean energy, like wind and solar energy.

In response, PSEG offered an option for exiting the capacity market, one that included an offer to forgo its nuclear subsidies. Thigpen said that proposal is entirely separate from its latest application to renew its subsidies for the nuclear plants.

Within the overall energy sector, however, there is deep division over whether states should be providing subsidies to clean-energy sources, such as renewable energy, like solar and wind, and nuclear.

“Ratepayers were long ago relieved of any obligation to support these deregulated generating plants and certainly have no obligation to assure the companies outsized returns on these investments,’’ Goldenberg said.