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NJ House, Senate committees pass bill offering payments to PSEG nukes

After a five-hour joint hearing, two New Jersey committees passed legislation offering two nuclear plants operated by Public Service Enterprise Group Inc. additional revenue through "nuclear diversity credits." S. 3560 and A. 5330 passed on Dec. 20 with two amendments. The argument for fuel diversification seemed to win support from members of the Senate Environment and Energy and Assembly Telecommunications and Utilities Committees.

State Senate President Stephen Sweeney, a Democrat and co-sponsor of S. 3560, had introduced prior legislation authorizing renewable energy certificates and offshore wind energy certificates. But he argued that the state should not put all its eggs in one basket of resources.

"I would argue that nuclear is an important piece in our portfolio," Sweeney said.

Sen. Bob Smith, another co-sponsor, worried about higher costs to ratepayers if the economically troubled Hope Creek and Salem nuclear plants in southern New Jersey were shut down. PSEG subsidiary PSEG Nuclear LLC owns Hope Creek and part of Salem, which is 42% co-owned by Chicago-based nuclear power generator Exelon Corp.

Legislators are attempting to push the bills through during a lame duck session, Smith said, "because we can get it done." It's not certain they could get it done in the new year. Republican Gov. Chris Christie will hand the reins over to his successor Phil Murphy, a Democrat, on Jan. 16, 2018. Christie earlier this month declared his support for nuclear power. Commenting to reporters on Dec. 19 about PSEG's plants, Murphy said "We are all in to keep them operating till the last day provided they are operated responsibly," according to a recording posted by WBGO.org.

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The bills, released on Dec. 15, would make nuclear plants licensed to operate through at least 2030 eligible for nuclear diversity credits, provided they show a financial need and contribute to fuel diversity and environmental benefits. The bill does not apply to the Oyster Creek plant, which Exelon plans to retire in 2019.

Director of the Division of Rate Counsel Stefanie Brand, the state's top consumer advocate, opposed the legislation. Though she does not want to see PSEG's plants close, she urged more time for a "balanced review" of the plants' financial situation. The legislation could raise residential electric bills by an average of $40 a year, Brand claimed.

PSEG Chairman, President and CEO Ralph Izzo cited economic studies showing that consumers would face degraded air quality, higher electric bills and impaired reliability if the plants are allowed to retire. The bills cap costs at a max $300 million a year, but retiring Hope Creek and Salem could cost upwards of $1.75 billion, according to Izzo's oral and written testimony.

"At the end of the day, the cap is a 2.4% impact on the total customer bill," Izzo said. PSEG residential customers would see an average increase of $31 per year, Izzo added.

Mauricio Gutierrez, president and CEO of Princeton, N.J. based competitive generator NRG Energy Inc., called the legislation "bad public policy" that "creates one winner and many losers." He urged New Jersey legislators to follow Connecticut and study the issues surrounding nuclear first before issuing legislation. Two Connecticut agencies last week released a study finding that Dominion Energy Inc. Millstone's nuclear plant is in no immediate financial distress.

Proponents raised concerns that retiring nuclear capacity could lead New Jersey to rely entirely on natural gas, more pipelines and out-of-state generation. A November 2017 IHS Markit report concluded that the retiring plants would be replaced by a mix of 15% renewables and 85% natural gas, while a Brattle study from December found that eliminating nuclear generation would make the state more reliant on natural gas and coal generation.