Are New Jersey’s three nuclear power plants profitable?
That question has been hotly debated since Public Service Enterprise Group was awarded $300 million in annual ratepayer subsidies to avoid the company closing its South Jersey plants in April 2019.
Now a state-hired consultant has suggested that any new subsidy for the utility could be significantly reduced. That is detailed in new preliminary reports that assess the company’s bid to retain the lucrative financial incentives for another three years.
Perhaps more importantly, a letter from the staff of the New Jersey Board of Public Utilities seems to imply that all three nuclear units are not profitable — a reversal of the staff’s stance in 2019 when it recommended the plants did not qualify for the incentives.
In a 4-1 vote back then, the BPU commissioners approved the subsidies, ignoring similar recommendations to reject the financial aid by the New Jersey Division of Rate Counsel, its own consultant Levitan & Associates and a firm that monitors the competitiveness of the regional power grid, the PJM Interconnection.
In the letter posted Thursday on the agency’s website, the staff essentially backed many of the conclusions reached in the Levitan & Associates reports, including assessments by the consultant about what revenue and cost adjustments ought to be considered.
In general, the consultant said it found many of the company’s economic projections reasonable but questioned whether some of the assessments underestimated revenues the plants will generate.
If so, the consultants said those adjustments “would significantly reduce PSEG’s requested subsidy amounts.’’ In its application the company sought to retain the full $300 million a year subsidy.
The staff letter, however, also noted none of those cost and revenue adjustments results in a profitable outcome where revenues exceed costs at all three of the plants.
“The combined impact of all these adjustments results in a material financial improvement but does not make Salem I profitable.’’ The same language was echoed by the staff in virtually identical letters for the Salem II and Hope Creek units.
PSEG, while it welcomed some of the consultant’s report, disputed some of its conclusions.
“We’re also pleased that the consultants also confirmed the value of the plants to the environmental goals of the state, agreeing that retirement of the plants will result in increased emissions of power plant pollutants in New Jersey and surrounding states, which would contribute to a deteriorating in the state’s air quality,’’ according to a statement released by the company.
For and against the subsidies
The plants provide 37% of the state’s electricity, or more than 90% of carbon-free power in New Jersey. According to the company, replacing the power from the closed units would increase global warming pollution and increase costs to ratepayers.
The retention of the subsidies is backed by a broad coalition of labor and business interests but opposed by others who fear that continuing them will make big manufacturers unable to compete with competitors in other states.
“New Jersey’s citizens and businesses are already burdened with paying among the highest electric rates in the nation and are headed higher without regard to the impact of this billion-dollar transfer of wealth with PSEG will have on our citizens, businesses and jobs,’’ said Dennis Hart, executive director of the Chemistry Industry Council of New Jersey.
Hart asked BPU staff to provide detailed analysis as to what has changed in the past three years that would cause them to walk away from their recommendations of three years ago.
Jeff Tittel, director of the New Jersey Sierra Club, agreed. “There is a lot of questions that need to be addressed,’’ he said. “They are back and they are out to grab our wallets,’’ he said.
There will be a public hearing on the company’s request on Feb. 1, and a decision on whether to grant new subsidies is expected to be made in April.