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Huge Win for PSEG as Reluctant BPU Approves Nuclear Subsidies

‘The board is being directed to pay a ransom,’ said Commissioner Bob Gordon. Upendra Chivukula was the only commissioner to vote ‘no’

Salem nuclear
Credit: Wikimedia Commons
Salem nuclear power plant

A deeply conflicted Board of Public Utilities yesterday approved $300 million a year in subsidies to the owners of New Jersey’s three nuclear power plants, ignoring three separate analyses that found the units profitable and in no danger of closing.

The 4-1 decision by the five commissioners marks a huge victory for PSEG, which owns Hope Creek and runs it along with Salem I and Salem II, partially owned by Exelon. PSEG had threatened to close all of the units if each failed to receive the utility-customer funded subsidies, which are dubbed zero emission credits (ZECs).

The outcome once again demonstrates the enormous influence wielded by the state’s largest energy conglomerate, first by muscling a controversial nuclear-subsidy bill through the Legislature last year. It then convinced a clearly reluctant BPU to approve the subsidies — even though its own staff found the company had failed to meet the financial threshold to qualify for the incentives.

Bob Gordon
Credit: NJTV News
BPU Commissioner Bob Gordon

“In my view, the board is being directed to pay a ransom,’’ said BPU Commissioner Bob Gordon. “We’re here today because these plants are not losing money, but because they are not profitable enough,’’ said Gordon. He voted for the subsidies, which take effect immediately.

For the typical residential customer, the decision will increase their annual bill by $41. The cost will be much higher for businesses. Gordon mentioned being told by a paper company that it would cost it an additional $2 million a year, possibly forcing its closure.

Potential closure of plants weighed heavily

In the end, despite misgiving by other commissioners, the board apparently decided the potential closing of the plants outweighed concerns that legislators drafted the law to direct the agency to award the entire $300 million, effectively tying its hands and barring it from giving smaller subsidies, if a smaller amount would suffice.

PSEG issued a statement after the vote, saying it was pleased the state is backing the plants, which provide about 32 percent of the state’s electricity and 90 percent of its carbon-free power.

“The BPU just saved the people of the state hundreds of millions of dollars in what would have been higher energy costs, thousands of jobs lost and tons of environmentally damaging emissions,’’ the company said. It has argued that replacing the lost power from the nuclear units would have cost as much as $400 million.

Commissioner Upendra Chivukula, the only member to vote “no,” was unconvinced, describing PSEG’s tactics as holding a gun to their heads. “It is a sad day for the U.S.,’’ said Chivukula, who came to this country 45 years ago from India.

Others disagreed, saying the goal is to keep the plants open, an argument that suggests PSEG’s efforts to focus on their closing, rather than whether it had demonstrated the plants are not economical won the day. “Only our vote today can save our nuclear fleet,” said Commissioner Mary-Anna Holder.

Rate Counsel not surprised

Rate Counsel Stefanie Brand, one of the few intervenors who got to look at PSEG’s finances, said she was not surprised by the outcome. “I guess the tactic by the company worked. ‘We want more money.’ They got more money,’’ she said.

Stefanie Brand
Credit: NJTV News
Rate Counsel Stefanie Brand

In her filings, the Rate Counsel contended the company had inflated the costs and lowered projected revenues, a finding essentially endorsed by BPU staff, the Independent Market Monitor for PJM, and a consultant retained by the board.

Brand deflected questions whether her office would challenge the awards, saying it has to review the board’s written order. Nevertheless, pointing to the commissioners’ own reluctance to approve the ZECs, she added, “they kind of made my case for me.’’ Her office argued the state had the right to approve less than the $300 million stipulated in the nuclear bill, saying its mandate to set reasonable and just rates trump the statute.

Yesterday, Sen. Bob Smith (D-Middlesex), who helped draft the law, told the Star-Ledger’s Tom Moran he decided to set the incentive at $300 million because PSEG CEO Ralph Izzo told him it was the right number.

The issue attracted hundreds of pro- and anti-subsidy advocates to the State House for the BPU’s monthly meeting, normally a very dry regulatory meeting attended by a couple score of lawyers and lobbyists.

‘Power politics’

Some left unhappy. “Today, the BPU lost most of its credibility when they pushed through the biggest corporate subsidy in state history,’’ said Jeff Tittel, in a bit of hyperbole. The initial subsidy is for three years and could amount to $1 billion. But the company can return in succeeding years and seek additional ZECs, although the BPU will have more flexibility in deciding how much, if any, to award. (The legislation only directs the BPU to award the entire amount in the first go-round; otherwise, it has flexibility.)

“This vote wasn’t about nuclear power, global warming or air pollution — it was about money, power politics and who wields influence in Trenton,’’ said Doug O’Malley, director of Environment New Jersey and a critic of the nuclear bailout.

Others were pleased. Senate President Stephen Sweeney (D-Gloucester), who steered the bill through the Legislature, issued a statement with his colleagues in the district. “The BPU made the right decision and it was a decision based on the facts, the realities of New Jersey’s energy needs, and what is best for the economy, the environment and consumers,’’ they said.

But Tittel and other environmentalists, who have backed the Murphy administration’s clean-energy agenda, fear the subsidies will make it more difficult, if impossible, to push more of those initiatives through the Legislature. “This subsidy will determine New Jersey’s energy policy for a generation,’’ he said.

According to consumer advocates, there are more than $12 billion worth of utility filings before the BPU. They include proposals to electrify the transportation system; modernize the grid; decrease energy consumption; and build offshore-wind farms. Just yesterday, Elizabethtown Gas sought to increase its revenue by $65 million.

Across the country, cheap natural gas prices have made operating nuclear plants more challenging. Other states, like New York and Illinois have approved similar subsidies to avert units closing in their states.

But the subsidies are making it difficult for industries that use large amounts of energy to compete with entities in neighboring states, according to Dennis Hart, executive director of the Chemistry Industry Council.

“The business community has been testifying all along this subsidy will cost individual businesses hundreds of thousands of dollars in added electric charges, while paying 56 percent more for electricity than competing industries around the country,’’ he said.

See the action at yesterday’s BPU meeting on NJTV News.

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