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PSEG, Exelon pause capital projects at Salem plant until NJ nuclear bills pass

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PSEG, Exelon pause capital projects at Salem plant until NJ nuclear bills pass

Public Service Enterprise Group Inc. and Exelon Corp. decided to cancel funding for future capital projects at the Salem nuclear plant until New Jersey legislators act on proposals to provide financial aid to in-state nuclear resources.

PSEG subsidiary PSEG Nuclear LLC owns about 57% of the 2,328-MW plant and is its operator, and Exelon subsidiary Exelon Generation Co. LLC owns the remaining roughly 43%.

Given market conditions and a stalled vote in the New Jersey Senate on a bill to support nuclear power, Exelon and PSEG agreed to withhold funding at Salem for capital projects "that are not required to meet Nuclear Regulatory Commission or other regulatory requirements or that are not required to ensure its safe operation," according to a March 2 Form 8-K filed by PSEG.

The two companies said in the Form 8-K that "funding of these projects may be restored when and if legislation is enacted in New Jersey that sufficiently values the attributes of nuclear generation and Salem benefits from such legislation."

The actions come after the New Jersey Senate on Feb. 26 held off on a vote on Senate Bill 877, which offers assistance to nuclear plants that show a financial need and get approved by the state's utility regulator, the Board of Public Utilities. Senate President Stephen Sweeney, a co-sponsor of the bill, told reporters after the stalled vote that the bill is complex and needs further review, according to an NJ Spotlight article published Feb. 27.

The bill authorizes nuclear plants licensed to operate through at least 2030 to apply for credits, which makes Salem and sister nuclear plant Hope Creek eligible but not Exelon's Oyster Creek plant, which is slated to retire in October.

PSEG, which owns the 1,172-MW Hope Creek outright, is still assessing the situation at the plant but anticipates that "similar actions may be appropriate," according to the Form 8-K. The assessment comes as Hope Creek is scheduled for a refueling outage this spring, PSEG Executive Vice President and CFO Daniel Cregg said during the company's fourth-quarter 2017 earnings call Feb. 23.

Exelon and PSEG each own half of the 2,584-MW Peach Bottom plant in York County, Pa., but did not discuss funding for capital spending at that plant when they met Feb. 28 to talk about Salem, according to the Form 8-K. Exelon operates Peach Bottom.

S.B. 877 began as a 12-page bill authorizing the BPU to create a zero-emission credit, or ZEC, program to support nuclear plants, but a version as of Feb. 22 was expanded to 43 pages after sponsors added provisions touching on, among other things, offshore wind and energy storage.

The ZECs offer compensation to nuclear plants for the benefits they provide in avoiding air pollution such as carbon dioxide, sulfur dioxide and nitrogen oxides. The credits would be purchased by the state's electric distribution companies. As of Feb. 22, the bill authorizes distribution companies to request an increase in rates by about 0.4 cent/KWh, equal to $4/MWh, to cover the costs of the credits.

At a legislative hearing Feb. 22, PSEG Chairman, President and CEO Ralph Izzo said the credits would add up to about $300 million a year in costs for retail customers. But retiring Salem and Hope Creek would remove more than $800 million a year of economic benefit to the state, according to Izzo's written testimony.

Legislators during the joint hearing of the Senate Budget and Appropriations Committee and the Assembly Telecommunications and Energy Committee passed S.B. 877 and its companion, Assembly Bill 2850, even though they were not clear on the costs to ratepayers.

The New Jersey Coalition for Fair Energy, which represents merchant generators, said in a statement March 2 that the move by Exelon and PSEG on Salem is "yet another example of nuclear owners holding their states hostage." Other states such as Illinois and New York adopted similar ZEC programs in 2016, and Pennsylvania and Ohio are considering assistance programs as well.

"It's ironic that PSEG will pass on lavish dividends to their New York-based investors while at the same time threatening to withhold much-needed investments from local communities," coalition spokesman Matt Fossen said.

PSEG on Feb. 20 raised its first-quarter common stock dividend payout by 2 cents per share, or 4.7%, to 45 cents, according to a company press release.