Monday, February 18, 2019

Izzo: Nukes Outside NJ Likely Eligible for State ZECs

By Peter Key


A recently passed New Jersey law could lead to the state subsidizing nuclear plants outside its borders, Public Service Enterprise Group (PSEG) CEO Ralph Izzo said during his company’s first-quarter earnings call Monday.

“The bill simply says that New Jersey wants 40% of its power supplied by nuclear energy and it does not limit it geographically,” Izzo said.

Izzo made the statement in response to a question from Morningstar’s Director of Energy Research Travis Miller, who said he thought nuclear plants outside New Jersey could be eligible for the zero emission credits (ZECs) authorized by the legislation.

PSEG ZECs earnings Ralph Izzo Q1 2018

PSEG head Ralph Izzo says NJ Gov. Phil Murphy supports the jobs at the Hope Creek nuclear plant. | NRC

In addition to the Salem and Hope Creek nuclear plants that PSEG operates in Salem County, N.J., Izzo said the Peach Bottom nuclear plant in Pennsylvania, of which PSEG is half owner, could compete for ZECs. So, he added, could two other Pennsylvania nukes: Talen’s Susquehanna and Exelon’s Limerick.

The ranking system the legislation encourages the New Jersey Board of Public Utilities (BPU) to use in determining which plants get ZECs is driven by their impact on the state’s air quality, Izzo said.

Gov. Phil Murphy has not signed the legislation, which was passed April 12. He has 45 days from then to sign it into law; veto it, which both houses of the legislature could override with two-thirds majorities; conditionally veto it, which amounts to sending it back to the legislature with changes requiring majority approval; or not sign it, in which case it would become law after the 45 days pass. (See NJ Lawmakers Pass Nuke Subsidies, Boosted RPS.)

PSEG ZECs earnings Ralph Izzo

PSEG head Ralph Izzo says nuclear plants outside New Jersey could be eligible for ZECs from the state. | © RTO Insider

Izzo declined to opine on what he thinks Murphy will do — “You never, ever want to pretend to be constraining your governor,” he said — but he also said the governor has been outspoken about nuclear power being a bridge to a future with much more renewable generation capacity and supportive of the jobs at PSEG’s two nuclear plants in the state.

As for PJM’s efforts to improve its capacity market, Izzo said PSEG supports the RTO’s two-stage capacity repricing proposal over the Independent Market Monitor’s plan to expand the minimum offer price rule. PJM earlier this month filed both plans with FERC, asking it to choose one and outline what aspects of it should be revised. (See PJM Capacity Proposals to Duel at FERC.)

Izzo said PSEG prefers the status quo to either option because it doesn’t interfere with the ability of states to price attributes that markets aren’t currently pricing, which, in PSEG’s case, are the emissions-free generating capabilities of its nuclear fleet.

PJM’s two-stage approach would at least continue to allow states to value carbon-free generation,

but what’s really needed is a price on carbon, he said.

“The market’s just got these inherent inconsistencies built into it,” he said. “If we could get a price on carbon … capacity markets could do what they’re supposed to do.”

PSEG CFO Dan Cregg addressed the company’s recent agreement to pay $39.4 million to settle an investigation into violations of PJM’s energy market bidding rules over 9 years. (See PSEG to Pay $39.4M to Settle FERC Investigation.) He said PSEG’s Power unit recorded an incremental $5 million pretax charge to income in the first quarter that will conclude the issue.

“We do not believe the order will have any ongoing impact” on PSEG Power, he said.

PSEG earned $558 million and $1.10/share in the first quarter, up from $114 million and $0.22/share in the first quarter of last year. Last year’s results included costs related to the early retirement of the Hudson and Mercer generating stations and a reserve for the impairment of leveraged leases.

As part of his effort to promote renewables, Gov. Murphy issued an executive order that began moving the state towards a solicitation of 1,100 MW of offshore wind capacity.

Izzo said PSEG has a lease and a partner, which he didn’t name, for offshore wind development, but said since his company has no experience in that area, it “would be interested in the transmission component as much as, if not more than, the actual wind farms.”