For Izzo, fight over PSEG subsidy turns personal

By Tom Bergeron
Newark | Feb 12, 2018 at 1:17 pm
Editor’s Desk

Ralph Izzo knew it was going to cause a fight, knew it was going to put Public Service Enterprise Group in the crosshairs of not just its competition, but a number of interest groups and the media.

That’s what happens when a successful company asks the government to approve what could be an annual $300 million bailout — paid entirely by taxpayers.

So, he made the request, explained why it no longer made sense for PSEG Power to maintain its two nuclear facilities in the state — and explained why, without the guarantee of what he called a safety net from the state, he had the fiduciary responsibility to PSEG shareholders, as the chairman and CEO, to close the plants, costing the state much of its carbon-free energy supply and (wait for it) a dramatic rise in energy costs for consumers.

And he waited for the backlash.

He just never thought it would be this bad.

“I made a conscious decision early on, unlike what some other companies did in other states, that I had to be the one out front,” he said during a meeting with members of ROI-NJ editorial team. “I’m not trying to be a martyr, but I knew it was going to be ugly.”

Ugly only begins to describe it.

Izzo, a CEO praised for his character and integrity by those who know him best in government and the business world, has essentially been called a liar, a fraud, a cheat and a crook by almost every special interest group and media.

A bill in the Legislature — that Izzo still feels has the support of state Senate President Steve Sweeney and new Gov. Phil Murphy — has had its posting delayed and its contents adjusted.

All while Izzo and PSEG are attacked under the premise that a successful company shouldn’t get a subsidy from a struggling state.

“It’s gotten a little bit more irrational than I thought it would get, I won’t deny that. But I didn’t think it was fair to put people in the position to take this kind of criticism unless I was willing to take it myself,” he said.

The personal attack is not unprecedented in the New Jersey business world.

Former Horizon Blue Cross Blue Shield of New Jersey Chairman, CEO and President Bob Marino faced a similar wave of criticism last summer, when former Gov. Chris Christie was convinced Marino was hoarding hundreds of millions of dollars Christie wanted for his campaign to fight opioid abuse.

Like Marino, Izzo admitted the attacks have an impact on his personal life.

“I do warn my family about some of the articles,” he said. “The kids are funny. They’re teenagers. My daughter says, ‘Haters are gonna hate, Dad. Don’t let it get to you.’ My son sends me texts from the West Coast, ‘Hang in there, Dad.’

“My wife is a little more emotional about it. I have to be careful at dinner because some expletives start to fly around. She does say, ‘I don’t know how you are going to do it.’”

Of course, in this fight, family is more than personal.

The attacks have an impact on PSEG employees, specifically the 1,500 or so at PSEG Power, the company that operates the nuclear plants now in the crosshairs.

Suddenly, their jobs and their futures are in question. Izzo knows it has some already looking for another job in an industry that has few.

Izzo said everyone is caught up in a Catch-22 for which he cannot find an answer.

“What would guarantee the passage of this bill is if we shut the plants,” he said. “But if we shut the plants, passing the bill doesn’t matter. So, we have to make them feel we are going to shut the plants.”

That, he said, has dire consequences.

“What is that going to do to the 1,500 employees?” he asked then answered. “They start to leave. And who leaves? The ones with the longest careers, the most talented ones. And who stays behind? The ones who say, ‘It’ll take them two to three years to shut this plant down I’ll just retire then.’

“How do we replace them? Because we need them to run the place. Go to Penn State and a kid does a Google search on PSEG and (sees its) chairman’s been talking about the plant shutting down. (A student will say), ‘I’m not going to work for them, I’m going to work for Exelon or Duke or Southern.’

“So, now you’ve got this operational nightmare that accelerates the closure of the plant.”

It’s essentially become a game of chicken.

Izzo said that, if the company feels the bill will pass, it does (and does not do) certain things. Actions, he said, that call into question the credibility of the company.

“We don’t file with the Nuclear Regulation Commission,” he said. “We bid on another auction. If the bill passes, there is enough economic juice to stay online. Well, what happens? Some opponent says, ‘Oh, they bid on another auction, they aren’t closing the plants.’

“So, the more we try to keep the plants alive, hoping the state will do something, the less credibility we have.”

It’s the reason Izzo is the middle of the crossfire.

He said it makes no economic sense to continue operating the plants.

“Our investors will not spend a billion dollars a year to break even,” he said. “There are other things they can do with their money. The other crazy question that I get is: Well, the company is making money? Well, yes. If Sears is making money, and they own 500 stores, and 10 of the stores are losing money, they will close (those) stores.”

Closing the nuclear plants will cause prices to rise, but it also will raise the state’s carbon usage. And raise it dramatically.

He feels the argument for a subsidy — one that he said would only be paid under certain conditions — is sound.

He defended his decision to not open the books to a consumer advocate — fearing information that could hurt the business will get in the wrong hands — but said he welcomes sharing the information with the Board of Public Utilities.

He thinks a credible analysis of the argument will help the company prevail.

“I really do believe that that credibility is at the heart of the absolutely, 100 percent, absurd behavior on the part of people who are diametrically opposed, arguing the same point,” he said.

“There is no way our competitors and AARP can both be happy if this bill doesn’t succeed. There is no way the environmental committee and (the American Petroleum Institute) can both be happy if this bill doesn’t succeed.

“The only logical explanation is they don’t think the plants are going away.”

The plants are going away without state assistance, Izzo said.

The criticisms of PSEG may not be. And that, Izzo admits, is upsetting.

(READ MORE from ROI-NJ from the interview with Ralph Izzo.)

“It is a strain on the family, but I do think what I stay focused on more so is the impact on the company,” he said. “Because this company has been around for 114 years. And it has a great, great reputation.

“Last year, we were named (to) the ‘Just 100’ by Forbes. We didn’t apply for that. They just went out and did a survey and analysis of what companies are doing.

“You can look at that wall. There are always awards for Ralph Izzo; it’s nonsense. None of those awards are for Ralph Izzo, (they are) for PSEG. There’s Diversity Inc., there’s the Seven Seals, there’s a whole myriad of things. That’s the part I want to make sure we pay attention to.”

Izzo points out the first two words of the company’s name are “Public Service.”

“To see that criticized and questioned has been the worst part,” he said.

Izzo, the CEO since 2007, said he never thought the fight would get this bad. Especially for an issue he has been raising on quarterly earnings calls for more than a year.

“This has been by far the most painful public policy interaction we have had,” he said. “I expected a contentious discussion around the mechanism (of the bill), even though there have already been two templates in two other states. I thought New Jersey, nevertheless, would want to write its own.

“I did not expect the attack on us at the level of, ‘They don’t need the money, they’re bluffing.’ That was the biggest surprise. That they think we would come out and say these plants are at risk and not mean it.

“That is simply mind-boggling. From two points: You know who we are; OK, maybe you thought we were liars and thieves all along, but do you not think we are intelligent businesspeople? Would we go out to the world and say we have 3500 megawatts, producing 57 percent of our electricity, underperforming at an economic peril? That’s not something you misrepresent.”

Still, Izzo said he’s determined to fight on, determined to take the attacks. He said it’s all part of the job.

“I am absolutely, 100 percent, convinced it’s the right thing for the state of New Jersey,” he said. “I am 100 percent convinced that over time people will realize we are being a good corporate citizen and we are trying to be helpful to the state.”