Public Service Enterprise Group’s three nuclear plants in South Jersey are expected to turn a profit this year, according to a new analysis that raises more questions about the subsidies awarded to the company just last month.
In April, the New Jersey Board of Public Utilities extended the $300 million annual subsidy paid by customers for another three years beginning in 2021, a step that was to prevent the company and Exelon Generation, co-owner of two of the units, from closing the facilities because they said the plants were not economically viable,
The subsidies have been hotly contested by consumer advocates, business groups and New Jersey’s Rate Counsel since the BPU awarded the first round of incentives in 2018. They have been joined in opposing the subsidies by the Independent Market Monitor, an organization that oversees the competitiveness of PJM Interconnection, the nation’s largest power grid.
In the money
In the past, Joseph Bowring, executive director of the Market Monitor Group, has opposed the subsidies, arguing that by most accounting metrics, the plants are profitable. Bowring concluded so again in his latest quarterly report released last week when he projected the three plants would turn a profit in the coming year, even without a subsidy based on an analysis of forward energy prices and costs of operation.
By his projections, the Hope Creek plant would post a surplus in 2021 of $33.9 million and the two units at Salem would have a combined surplus of $100.4 million. With the subsidies, Hope Creek would earn $129.3 million and two units at Salem $251 million.
“Hope Creek, Quad Cities (two-unit nuclear facility in Illinois) and Salem all currently receive subsidies,’’ the analysis said. “Based on forward prices of April 1, 2021 and NEI (Nuclear Energy Institute) average costs, none of these units need a subsidy.’’
PSEG begs to differ
In a statement from PSEG, the company noted the BPU conducted an extensive review of the plant’s financial data that showed the units are not financially viable and will close without material change.
“The PJM Independent Market Monitor produces his reports using publicly available data that does not accurately reflect our costs,’’ the statement said. PSEG added it has frequently corrected the IMM’s data in previous proceedings.
Others, however, backed the assertion by the IMM that the plants are profitable.
“Those are pretty gaudy numbers,’’ Glen Thomas, president of PJM Providers Group, a nonprofit organization of energy suppliers, referring to the projections by Bowring.
“I’m not surprised,’’ said Rate Counsel Stefanie Brand. “They (the plants) are making money. No one wants to believe us.’’ Brand complained the whole review process on whether the plants should receive subsidies has become distorted.
“Under the statue, there is supposed to be an objective review of whether a rational economic observer would make about the plants’ profitability,’’ she said. Instead, it has turned into a subjective process made by PSEG. “It is not supposed to be whether PSEG decides it is not making enough money.’’
Headed for the state’s top court?
Brand, like Bowring, has opposed giving subsidies to the plants in the first award, challenging the decision in a state appeals court, which earlier this year upheld the BPU’s action. The New Jersey Supreme Court has been asked by the Rate Counsel’s office to consider taking up the appeal.
Critics of the subsidies argued the IMM’s analysis is reliable. “Those numbers are designed to be objective to what is happening in the PJM market,’’ said Steven Goldenberg, an attorney for the New Jersey Large Energy Users Coalition, which has seen energy costs spike because of the subsidy. “This is his job and most of us think he’s done a good job.’’
For some, the issue seems to have been decided already. “From a policy perspective, it seems like the BPU has made its decision as a matter of policy for the next three years,’’ said Paul Patterson, an energy analyst at Glenrock Associates in New York City.
In a budget hearing Monday, BPU President Joseph Fiordaliso defended the award of subsidies. “We were told under oath that they were just not economically feasible,’’ he said, when asked about the nuclear facilities.