Lawmakers are feeling the pressure on rising energy costs. As legislative offices are inundated with calls from constituents about the impending electric rate increase set for June 1, policymakers are calling on regulators for answers and solutions.
Some are taking the opportunity to lay blame on Gov. Phil Murphy and incumbent legislators for political gain. Pointing fingers, however, does nothing to address the real culprit here: the failure of PJM, which manages our electric grid, to plan for energy demand. Currently, there is an average wait time of five years to bring new electric generation projects online. Expediting the connection of these projects, the majority of which are reliable and affordable renewables, to the grid will increase the electricity supply and help keep our rates down.
The electric grid is the largest industrial machine in our lives, yet most of us only think about it when we pay our bills and when the power goes out. And even then, most of us don’t understand the details about where our power comes from or how rates are set.
To ensure that there will always be enough electricity, PJM contracts with power plants across its region to ensure power is available when it’s needed. This is done through an auction in which power generators bid to provide the amount of electricity needed to meet projected demand. These bids set the price PJM will pay, which is passed onto consumers. Last summer’s auction resulted in total costs of nearly $14.7 billion, compared to the prior year’s $2.2 billion, a huge increase.
With PJM’s auction complete with national generators and suppliers, New Jersey had to then do a similar auction with New Jersey’s power generators. In February, the New Jersey Board of Public Utilities (NJBPU) announced the outcome of New Jersey’s electricity auction, resulting in a 17-20% increase in electricity prices for New Jersey consumers beginning in June – representing a trickle-down effect that started at PJM.
The truth is that the Murphy administration has worked tirelessly to advance energy options for New Jersey residents that will increase our energy independence and reliability, which ensures electricity is available when it’s needed. And while the state is limited in some ways to address PJM’s failures, there are state-level actions that can directly address current concerns.
One of the biggest drivers of rising rates is energy demand. As more “things” plug into the grid, we need more energy to power them. As technology advances at lightning speed, the rise in data centers across the PJM region has put significant pressure on our grid.
Data centers are mega warehouses, filled with computers and air conditioning and can be rated in the hundreds of megawatts. Earlier this month, during a legislative oversight hearing, PSE&G testified that if all of the pending data centers in its jurisdiction were to move forward, they would require approximately 4.7 gigawatts of power—placing untenable stress on the grid.
Current state policy incentivizes the investment and development of data centers in New Jersey. The electric reliability they require is a cost shouldered by all ratepayers in the state. The current energy forecast includes significant growth in data centers throughout the PJM region.
The state should seize this moment to act responsibly for all New Jerseyans by rethinking our data center policy. Potential options for remedies include:
Adding regulations that require data centers use 100% renewable energy. Urge PJM to adopt this goal throughout the region.
Requiring data centers to bear their own reliability costs instead of passing this increase onto residential ratepayers.
Instituting statewide planning mandates to limit build-out.
These types of policy changes that prioritize residents of New Jersey, especially those most sensitive to cost increases, should be acted immediately.
Daniel Janowski is the Director of Voter Outreach for Action Together New Jersey Education Fund (ATNJ Education Fund). ATNJ Education Fund educates, engages, and empowers New Jerseyans to be active citizens participating fully in our vibrant democracy. Advancing clean energy policy that benefits all New Jerseyans is a priority for the organization.
The opinions expressed are those of the author and do not necessarily reflect the views of ROI-NJ.
