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PSEG executive urges NJ legislators to provide 'safety net' for 2 nukes

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PSEG executive urges NJ legislators to provide 'safety net' for 2 nukes

Public Service Enterprise Group Inc. CEO Ralph Izzo on Dec. 4 urged New Jersey lawmakers to create a "safety net" for the company's Salem and Hope Creek nuclear plants.

Those two plants, along with Exelon Corp.'s Oyster Creek nuke, slated to retire in 2019, provided about 39% of New Jersey's generation in 2016, according to data from the U.S. Energy Information Administration.

Today, the two plants today "are in the black," meaning they are profitable because the company was able to presell their output under contracts that are above market prices, but some of those contracts will expire this year, Izzo said in a written statement to a state legislative session on Dec. 4.

New Jersey Senate Environment and Energy Committee Chair Bob Smith and Assembly Telecommunications and Utilities Committee Chair Wayne DeAngelo held the joint session to understand the extent that nuclear plants are at risk.

The output of the Salem and Hope Creek plants are sold into the regional power grid operated by the PJM Interconnection and face pressure from a "flawed" market design, Izzo said. Short-term markets tend to favor cheap natural gas and do not currently value certain "externalities" like the fuel diversity and carbon-free benefits of nuclear power, according to Izzo's statement. New Jersey in 2007 set a goal to cut its greenhouse gas emissions by 80% below 2006 levels by 2050.

"Without intervention — without a thoughtful, economic safety net — PSEG will be forced to close its New Jersey nuclear plants," Izzo said.

He proposed that lawmakers design a safety net based on three principles. The first is the use of an economic needs test where power companies would "open their books" and show the New Jersey Board of Public Utilities a financial need, Izzo said in his testimony. Second, the safety net would include offsets for payments made at a regional or national level for environmental or fuel diversity attributes. Third, the safety net would be revisited on a three-year basis, Izzo said.

PSEG and Exelon funded a Brattle Group report that estimated an average New Jersey ratepayer could pay about $3.50 more on their monthly electric bills if the nuclear plants retire and are replaced by fossil-fueled generation, according to testimony from Dean Murphy, a principal with the Brattle Group and co-author of the report.

Arguments met with some skepticism

PJM's independent market monitor, Joseph Bowring, does not believe New Jersey nuclear plants are facing signals from PJM to retire. He said the costs of nuclear generation, based on data from the Nuclear Energy Institute, are about $31/MWh and revenues from selling into PJM, when including both energy and capacity revenues, are about $37/MWh.

Opponents to PSEG's proposal largely asked the state not to rush during a lame-duck legislative session. The state held elections in November and outgoing Republican Gov. Chris Christie will be followed by a Democrat. William Harla, a partner at law firm DeCotiis, Fitzpatrick, Cole and Giblin LLP who represents the New Jersey Coalition for Fair Energy, advised lawmakers to consider the priorities of incoming Gov. Phil Murphy's administration and possible solutions from PJM. The coalition is made up of competitive generators NRG Energy Inc., Dynegy Inc., Calpine Corp. and the Electric Power Supply Association.

Harla supported studying whether subsidies are needed first, saying in his testimony, "There is time to look at a bill when one is made public — and to seek the input of the incoming administration to ensure this proposal is consistent with the new governor's wind and solar initiatives."

Smith in March introduced in S. 3061, a bill that directed the BPU to study a zero-emission credit program similar to a policy adopted by New York and Illinois in 2016.

Thomas Rumsey, vice president of external affairs at independent generator Competitive Power Ventures Holdings LLC, was not convinced that closing the nuclear plants would lead to higher energy prices because of new development. "We are currently looking at another project in New Jersey," Rumsey said. In 2016, CPV, owned by asset manager Global Infrastructure Management LLC, brought online the 725-MW gas-fired Woodbridge Energy Center in central New Jersey.

Stefanie Brand, director of the state's Division of the Rate Counsel, said, "To rush this through lame-duck ... really puts ratepayers at risk." She warned that ratepayers could possibly double-pay if New Jersey acts to support nuclear plants, and PJM and the Federal Energy Regulatory Commission also provide assistance. On Dec. 11, FERC will respond to a U.S. Department of Energy notice on whether to assist fuel-secure power plants, a reference to coal and nuclear plants.

The state should consider whether New Jersey will rejoin the Regional Greenhouse Gas Initiative, a nine-state northeast cap-and-trade program, Brand said. Christie withdrew the state in 2011 but Murphy said during his campaign that he favored rejoining.