Nuclear subsidy bill passes both houses, awaits Murphy approval

By Anjalee Khemlani
Trenton | Apr 13, 2018 at 10:34 am

A bill that will help keep nuclear plants in New Jersey operational, as well as guarantee increased costs of energy consumption for consumers, was easily passed in both the Senate and Assembly on Thursday.

If signed by Gov. Phil Murphy, the bill paves the way for Public Service Enterprise Group and Exelon, operators of two nuclear plants in Salem County, to bid on the energy market next month and commit to providing energy in 2021-2022.

The bill will allow PSEG to receive up to $300 million annually from the state, based on a formula that considers the nuclear plant outputs from 2016, to keep its nuclear plants afloat for 10 years — pending a determination of need by the state Board of Public Utilities.

As a result of the $0.004 per kilowatt hour tariff added to consumer utility bills, ratepayers will pay up to $4 billion within a decade, according to the Division of Rate Counsel.

The BPU also would have an opportunity to review the need of the plants to continue getting funding within the decade.

PSEG and its minority shareholder of one of the nuclear plants, Exelon, filed a statement with the Securities and Exchange Commission in early March stating they have canceled capital funding for the plant pending the passage of the bill.

PSEG maintains that, without the subsidy, the nuclear plants will become unprofitable and have to shut down before the end of their useful lives.

The threat is not entirely without precedent. Around the country, nuclear plants have shut down before the end of their useful lives because of the prevalence of cheaper natural gas.

Exelon has also asked for similar subsidies in other states, some of which have faced litigation from competitors.

The bill faced intense opposition when it was first introduced, primarily from competitors of PSEG who believe the government is meddling in the marketplace.

The New Jersey Coalition for Fair Energy expressed opposition Thursday.

“The results of today’s vote are disappointing and disconcerting. What lawmakers have agreed to is not necessary financial assistance. It is a massive corporate bailout, paid for by a tax hike on ratepayers, simply to pad the bottom line of plants which are demonstrably profitable. While today’s outcome is a setback, it is not the end of this issue — and we will continue to reiterate the facts about PSEG’s nuclear plants. We urge Gov. Murphy to recall those facts, and do what’s best for New Jersey ratepayers by vetoing this unnecessary energy tax,” the statement said.

But some legislators believe that the subsidy is a reasonable cost to the state in exchange for maintaining energy diversity.

The Legislature also passed bills to boost wind and solar energy, which proponents say balance the scale in tandem with the nuclear subsidy bill.

“You can easily calculate what’s the cost of keeping the nuclear plants open right now. What you can’t calculate is what’s the cost of not doing it,” Sen. Steve Oroho (D-Sparta) told ROI-NJ.

“If we’re not having an actual resource of energy, that being nuclear, and we’re reliant on other states, then other legislatures have to the ability to control our energy, such as natural gas. If another legislature decides they don’t like the extraction of natural gas or they don’t like fracking or anything else, all of the sudden, we’re now impacted because the supply will go down. What will that cost?”

Oroho said the increased utility bills are worth the energy diversity.

“You can’t put all your eggs in one basket. You have to have a reliable, diversified fuel supply,” he said. “Have you seen all the protests over one or two pipelines. Think about all the pipelines we would need to have if we had to replace 40 percent of our use.”

Nuclear currently supplies less than 40 percent of the energy in New Jersey, according to the Office of Legislative Services.

Former Sen. Bob Gordon, who resigned last week to join the Board of Public Utilities, said the other bills will help move the state toward greater energy diversity.

“I think the challenge that we have is trying to balance the need for diversity in our energy sources with the impact on the ratepayer. We have to make sure there is a balance. We just can’t go in one direction and throw all the burdens on the ratepayer, that’s including the commercial payer,” Gordon told ROI-NJ.

“The governor has made it a priority to advance offshore wind and other renewables. If we can get any pilot projects in offshore wind and demonstrate its cost effectiveness, there is the potential to develop a whole series of ancillary industries to support that. The organizations that manufacture the turbines and all of the equipment and the service companies to support these facilities. I think that can be a particularly important thing for South Jersey.”

ROI-NJ’s recent coverage of the nuclear subsidy

 

Anjalee Khemlani | akhemlani@roi-nj.com | AnjKhem