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NJ bill offers nuclear plants additional pay through 'diversity' credits

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NJ bill offers nuclear plants additional pay through 'diversity' credits

New Jersey legislators introduced a bill that offers the state's largest utility, Public Service Enterprise Group Inc., payments for its nuclear plants in the form of "nuclear diversity credits."

State Senate President Stephen Sweeney and Sens. Bob Smith and Jeff Van Drew are the prime sponsors of S 3560, a bill that lets nuclear plants licensed through at least 2030 earn credits for each megawatt-hour of output. A companion bill in the General Assembly, A 5330, is sponsored by Assemblymen Wayne DeAngelo, John Burzichelli, John McKeon and Adam Taliaferro. Outgoing Gov. Chris Christie in recent days has favored such legislation.

The credit represents a payment for keeping New Jersey's fuel supply diverse and providing emission-free power that aids in meeting state and federal air quality goals. Exelon Corp.'s 637-MW Oyster Creek unit in Ocean County, N.J., is slated to retire in 2019 and would not be eligible. But PSEG's 1,172-MW Hope Creek unit and two Salem reactors, which total about 2,300 MW, would be since they are licensed to operate beyond 2030. Participation is limited based on 40% cap, meaning the amount of nuclear generation earning credits cannot be more than 40% of the power distributed.

PSEG affiliate PSEG Nuclear LLC owns and operates the two nuclear plants. Exelon owns a portion of the Salem plant. The Salem units are licensed to 2036 and 2040, and Hope Creek is licensed to 2046.

Under the bill, the New Jersey Board of Public Utilities, which oversees regulated utilities, would set up an nuclear diversity credit program and application process to select which plants qualify. Electric distribution companies would be required to purchase the nuclear diversity credits on a monthly basis over an eligibility period that typically lasts three years. In order to be eligible beyond the first three-year period, a nuclear plant would need to renew its eligibility with the board.

Distribution companies would also have to file tariff changes with the Board of Public Utilities to recover 0.4 cent/kWh, or $4/MWh, from retail distribution customers, but the bill leaves discretion to the board to reduce the amount.

PSEG Chairman, President and CEO Ralph Izzo, during a joint session of the legislature on Dec. 4, asked legislators to provide a "safety net" because the "flawed design" of the energy markets managed by the PJM Interconnection have caused reactors to not be paid their full value, according to his written testimony. Izzo noted that New Jersey is in a similar position as other states facing nuclear plant retirements such as Connecticut, Ohio, Pennsylvania, Vermont and Wisconsin. New York and Illinois in 2016 adopted subsidies in the form of zero emission credits for nuclear plants in their states.

On Dec. 15, PSEG spokesman Paul Rosengren said by email, "We believe the bill includes that framework to protect consumers while ensuring that the state continues to receive nuclear's economic, environmental and resiliency benefits."

Exelon spokeswoman Robin Levy said, "While the bill has no impact on Oyster Creek, which is being retired in 2019, it would deliver significant environmental and economic benefits for residents — including preserving New Jersey's main source of carbon-free power."

Others caution against rushing

Environmental and public interest groups said in a letter Dec. 13 sent to New Jersey legislators that there is "ample" time for the state to craft a comprehensive transition plan instead of rushing during the lame-duck session. It was signed by the Natural Resources Defense Council, the Environmental Defense Fund, and Rethink Energy NJ, a coalition advocating for renewable power.

The New Jersey Coalition for Fair Energy, a group of competitive generators, calls the bill "an energy tax hike."

"Both of PSEG's New Jersey plants are profitable, are expected to remain so in the coming years, while regional solutions are in place should they ever truly need immediate assistance. No one is denying Salem and Hope Creek's importance, but lame duck is not the time to address this issue, nor are New Jersey ratepayers the sole people who should have to fund a potential solution," coalition spokesman Matt Fossen said in a Dec. 15 email.

Before the bill came out, New Jersey's top consumer advocate, Stefanie Brand, who directs the state's Division of Rate Counsel, said in testimony during the Dec. 4 joint session the agency had no interest in seeing nuclear plants shutter, but that there is not enough evidence to definitely say whether PSEG's plants will not continue to earn a profit.

Legislators during the joint session also heard concerns that state assistance might duplicate efforts at a federal or regional level. Brand recommended that the nuclear issues are better addressed by "in-market" solutions done at the federal level and referred to actions by the U.S. Department of Energy and Federal Energy Regulatory Commission. In a Dec. 8 letter, PJM Vice President of State and Member Services Denise Foster reminded New Jersey legislators that the grid operator already has initiatives underway to refine its energy markets.