By Rory D. Sweeney
TRENTON, N.J. — If opponents of nuclear subsidies in New Jersey had an opportunity to sway the opinions of state legislators on the issue, it didn’t last long.
During a joint meeting Wednesday of the state Senate Environment and Energy Committee and Assembly Telecommunications and Utilities Committee, members early on indicated their support for a bill that would provide hundreds of millions of dollars in financial support to state nuclear plants. (See Nuke Bailout Bill Introduced in NJ Senate.)
After five hours of testimony, their opinions had not changed. Both committees unanimously voted to move the bill to their respective legislative bodies. ClearView Energy Partners, an energy research firm, said in a statement that the legislature could vote on the bill before the end of next week. It predicted Gov. Chris Christie would sign the bill into law before he leaves office on Jan. 16.
“There’s this constant question about ‘why now?’ The answer is: It’s one of the greenest bills we’ve run into in a long time, and No. 2, we can get it done,” said Sen. Bob Smith, who chairs the Environment and Energy Committee.
Opponents argued that the bill required no commitments from Public Service Enterprise Group, such as a plan for a transition to renewable energy when the plants are eventually decommissioned or a mechanism for the company to pay back any money if market conditions change to make its nuclear plants profitable again.
“You’re feeding the problem that this country faces right now with Donald Trump. We are losing faith in government, and if you [approve] this bill during lame duck, you are part of the problem,” said Doug O’Malley, director of Environment New Jersey. “So hold the bill. Let’s do this right in January, February and March.”
PSEG CEO Ralph Izzo opened the hearing by assuring legislators that enacting the bill was a vote of confidence for his company to commit years ahead of time to investing as much as $200 million annually for the plants’ supply chains.
“There’s been a lot of discussion about this being an automatic handout to utilities. That is not true,” Izzo said, noting that it will be at least 300 days until PSEG will know if its plants qualify for the subsidies proposed under the bill. “Over that time, we will have to decide whether or not to invest between $100 [million] and $200 million in those plants and make an estimate as to whether or not those plants will continue to operate for the remaining 20 or 30 years of their life to make that money back.”
PSEG currently has $275 million in commitments for fuel-related expenses until 2025, he said, and must decide over the next year whether it will commit to keeping the plants open through 2021.
“This is not a rush. This has been an eight-year discussion,” Izzo said. “I encourage you to recognize that driving the vehicle by exclusively focusing on the rear-view mirror is not the safest way to proceed. Most companies look forward on the prospects of their assets.”
Izzo’s comments were rebutted by Stefanie Brand, director of the New Jersey Division of Rate Counsel, who argued that the bill is unclear on how much money PSEG should make or how unprofitable the plants will be without support. Izzo said they will remain profitable at least until next year when a number of PSEG’s energy contract hedges expire.
“There are offramps for the company. There are no offramps for the ratepayers,” she said. ““I’m not advocating for [the plants] to close. I’m advocating for a system that doesn’t allow a single company to hold us hostage in this way.”
Senate President Stephen Sweeney grilled Brand on her concerns, asking whether she thought the state Board of Public Utilities, which would oversee distribution of the plan’s nuclear diversity certificates (NDCs), is capable of fulfilling that role. Brand said it was impossible to know because eligible plants could submit information confidentially without public review. She noted that the subsidized plants would also likely be subject to PJM’s minimum offer price rule (MOPR).
“The rest of us don’t have the information that PSEG does to claim they’ll close. … The consumer protections in this bill are really a delusion,” Brand said. PSEG is “deregulated, so there is no set cost of capital that they are set to earn.”
She added that out-of-state plants, such as Exelon’s Three Mile Island plant in Pennsylvania, might be eligible for the subsidy the way the bill is currently written.
Industry analysts also traded opposing studies on the issue. Dean Murphy with The Brattle Group outlined a study sponsored by PSEG and Exelon that argues it would be cheaper to pay to keep the plants running than to develop replacement power. Tanya Bodell with Energyzt said that report is “flawed” and includes substantial “uncertainty.” She challenged Izzo’s assertion that they might close within two years if they become uneconomic.
“The plants are committed to operate through 2021,” she said. “It would be more costly to retire before 2021.”
Joe Dominguez, Exelon’s executive vice president of governmental and regulatory affairs and public policy, said that while his company can’t decide whether to close the nuclear plants, it can stop investing in them. Exelon can nix any investment over $5 million into the plants, he said, and has come to an agreement with PSEG to begin deferring capital projects “in anticipation of the closure of” the Salem facility.
“As we looked at the market forwards … our concern was that we could no longer invest in the machine given what we were looking at in terms of future energy prices,” he said. “We are already acting on the belief that if adequate attribute payments aren’t provided for nuclear energy in New Jersey, we’re going to take the unit out of service, or at least from Exelon’s perspective, stop investing in the machines.”
One significant opponent to the bill received short shrift from legislators.
After calling NRG Energy CEO Mauricio Gutierrez to testify, Smith referred to him as “Maurice” and declined to attempt his surname, asking him to instead introduce himself. Gutierrez argued that the bill “creates only one winner and many losers, including my company.”
NRG owns no nuclear assets in New Jersey and has a portfolio of mostly gas-fired units. Substantial supplies of natural gas have kept commodity prices low and helped gas-fired generation offer into PJM’s markets at prices below nuclear units. The shift in generation economics has prevented some nuclear units from clearing auctions and denied them payments they say they need to remain profitable.
Gutierrez told the committees that had the subsidies existed before he decided to base his company in Princeton, N.J., he would have placed the headquarters elsewhere. The legislators asked no questions about his testimony, and Gutierrez appeared visibly frustrated as he returned to the audience.