PSEG’s LaRossa insists utility will close nuclear plants without subsidy

Power unit’s CEO complains rate counsel’s argument covers same ground as 2018 fight

By Anjalee Khemlani
Newark | Feb 14, 2019 at 5:40 pm

Public Service Enterprise Group is fighting back. Again.

New Jersey’s largest utility is doubling down on its promise to shutter three nuclear plants in South Jersey if it does not get approval for up to $300 million in state subsidies annually for the next three years.

Whether or not PSEG should receive the zero emission credits, or ZEC, is a question the state Board of Public Utilities is deliberating on and will have an answer for in April.

Ralph LaRossa, CEO and president of PSEG Power, told ROI-NJ on Thursday that the nuclear plants can’t compete with cheaper options and would have to close if they are not subsidized for the next three years.

“As part of that application process, you have to commit that you are closing the plants (if the subsidy is not approved) and we indicated that with an officer’s signature in that document,” LaRossa said.

If it sounds like the same fight that took place last summer, that’s because it is.

Earlier this month, the state’s rate counsel said the truckload of documents provided to the BPU show the utility is not in dire financial need of the subsidy.

In a 44-page response Thursday, PSEG said the claims made by the rate counsel are relitigating old issues that were brought up during the legislative battle, and that the rate counsel is unfairly characterizing some of the prices and financial information.

The unfair characterization is namely using the highest prices available to show revenue, rather than the mix of fluctuations for on-peak and off-peak pricing, according to PSEG.

The rate counsel and other opponents of the proposal are also suggesting that PSEG is using inaccurate methodologies to calculate the losses the plants could incur.

In the absence of nuclear energy, gas and coal plants would pick up the losses, as was already evidenced by the closure of one plant last year, LaRossa said.

PSEG said there was a shift of approximately 20 percent of electric generation from nuclear to natural gas as a result of the shutdown of Exelon’s Oyster Creek plant in September.

LaRossa said PSEG has consistently stated that keeping the nuclear plants open helps provide New Jersey a clean energy option in the buildup to stronger wind and solar energy production (both of which PSEG has dabbled in).

Nuclear is a clean energy option, but has fierce competition from cheaper and more abundant gas production — and the process for selling energy into the grid, which operates electricity for the entire region, prioritizes cheaper over cleaner energy in an annual bid process, he said.

That, LaRossa said, is why the subsidy is necessary. It helps to cover the costs of operating nuclear energy, which operates at the same pace throughout the day rather than with more control over how much is burning, like with coal and gas.

“The market is going to the next-cheapest product,” he said. “If the marketplace is not paying enough, that’s where the ZEC application comes in. It’s going to be as competitive as any other; for us, we are going to be compensated like we should be.

“(If) we know we have this other revenue source — because I can bid on 10 if I know I need 12 to run, because I get two from this other revenue source. If I wasn’t getting the two from someplace else, I have to bid 12 and then I’m going to be out of the market.”

And the threat of closing down all three plants, rather than just one or two, is both a cost-benefit issue and affects PSEG’s attractiveness as an employer.

“You operate as a whole fleet,” he said.

Despite lower costs of some labor and reduced purchasing of nuclear rods, if only one or two plants closed, the shared cost of all three plants make it an efficient endeavor for PSEG, LaRossa said.

The costs of operating just one nuclear plant cannot be sustained and would reflect poorly on PSEG for hiring future talent because it only has one plant, he said.

The rate counsel has been fighting back since the time the legislation was discussed, saying PSEG is using taxpayers to run its business.

Meanwhile, PSEG has maintained that lowering the cost of energy is an important step for the business to take to serve its customers — the very same taxpayers.

“From a carbon-free generation solution, this is a much-needed solution to keep around,” LaRossa said.

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