Board was right to allow $300M nuclear subsidy, appeals court rules

Owners said three NJ nuclear plants would close unless customers paid. State considers renewing the deal
Credit: (AP Photo/Mark Lennihan)
File photo: Salem Nuclear Power Plant in Lower Alloways Creek Township

A state appeals court upheld the decision by the New Jersey Board of Public Utilities to give hundreds of millions of dollars, paid by utility customers, to the owners of three nuclear power plants in South Jersey that they said were needed to prevent premature closing.

In Friday’s 47-page decision by the three-judge panel, the judges rejected arguments brought by the New Jersey Division of Rate Counsel and a range of business trade groups that said the BPU was wrong because those nuclear plants were profitable despite assertions otherwise by the company.

The ruling is a big victory for the Public Service Enterprise Group, the operator of the plants, and Exelon Generation LLC, which co-owns Salem I and Salem II. PSEG is the sole owner of the third unit, all located on Artificial Island in Salem County.

PSEG currently is in the process of seeking renewal of the zero emission certificates (ZECs), a ratepayer subsidy that now amount to roughly $300 million a year. The subsidy costs each residential customer about $70 a year. A decision on whether to renew the subsidy, and at what level, is expected by the BPU by the end of April.

Friday’s decision may make it more likely the nuclear plants will continue to obtain subsidy until 2050, an assumption implicit in the state’s Energy Master Plan, which projects the units will still be operating then.

BPU ignored recommendations

The original decision by the BPU to award the subsidy in April 2019 was controversial since the regulatory agency ignored recommendations from its own staff, a board-hired consultant, and others who disputed PSEG’s arguments the plants were no longer profitable enough to keep open.

The state wants to keep the plants open because they supply more than 90% of the carbon-free electricity in New Jersey. If they close, officials say the state will never achieve its goals of transitioning to 100% clean energy by 2050, or ambitious targets for cutting greenhouse gas emissions by 80% by mid-century.

In affirming the BPU’s action, the court said the decision is supported by the record and consistent with both the ZECs’ plain language and the legislative intent.

Rate Counsel Director Stefanie Brand was not surprised by  the ruling, she said. “We waited two years and just got a rubber stamp,’’ Brand said. “I’m surprised we didn’t see a deeper analysis. I’m disappointed that the interests of the ratepayer were not adequately considered.’’

PSEG was pleased the court agreed with the BPU’s decision to grant the ZECs to the nuclear units, according to Marijke Shugrue, a spokeswoman. “This decision confirms the BPU appropriately followed the statute and gives clear guidance on how to apply the existing law currently before the BPU,’’ she said.

Rejected arguments

The overriding issue in the case, the court acknowledged, rested on whether the plants were financially viable. Brand and others argued they were because the applicants improperly included operational risks, market risks, spent fuel costs and other expenses, none of which should have been included in the calculations.

Those arguments were rightly rejected by the BPU, according to the court, based on the legislative directive to include those costs in the application. As for the BPU commissioners rejecting advice from its staff and consultant, the court said they had no obligation to consider them, including the BPU’s own retained consultant’s recommendation.

“The ultimate eligibility determination for ZECs is to be made by the board alone,’’ the court ruled. The decision also disputed Rate Counsel’s contention that the board’s granting of the subsidy was based on fear the company would close the plants if it did not get subsidy for all three units.

“Our concern is that the subsidy money going to nuclear power will undermine the funding we need for renewable energy,’’ said Jeff Tittel, director of the New Jersey Sierra Club, an organization that has opposed giving ratepayer incentives to the nuclear industry.

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