New Jersey enacted a law last year to provide subsidies to its three nuclear energy plants if necessary to keep them open. The plants in Salem County generate 40 percent of the state’s electricity and about 90 percent of its emissions-free energy.
Whether a subsidy is needed and, if so, how much it should be are questions now before the state Board of Public Utilities. The filings in the case, at least the portions of them that are public, raise serious new questions about whether owners PSEG Nuclear and Exelon Generation need state help for the plants to remain profitable and open.
PSEG, which owns Hope Creek outright and most of Salem I and II, reasserted that it will close the plants within three years without a subsidy. It submitted five years of financial data on the plants to show they qualify for an annual subsidy of up to $300 million from customers — about $31 to $41 a year from a typical homeowner.
Ratepayer Advocate Stephanie Brand, who has seen the plant finances that won’t be released to the public, reported to the BPU that she thinks “PSEG and Exelon have overstated their costs and understated their revenues” to exaggerate the plants’ financial distress. She said subsidies would put ratepayers at risk for future losses without the ability to share in possible future profits.
She also said wind and solar power could partly replace the plants if they closed and not just natural gas generators as the companies assumed. But that’s not quite true since nuclear plants are baseload providers of energy unaffected by weather conditions and cheap natural gas plants would need to cover nuclear’s entire reserve capacity to ensure demand for electricity is always met.
The independent market monitor for the PJM electric grid that includes New Jersey, who also is participating in the case with full access to the financials, agreed with Brand that the subsidy application understated future revenues while overstating costs and risk.
Joseph Bowring, an economist, also pointed out another complication — efforts are underway by the grid and others to get the Federal Energy Regulatory Commission to boost revenues for reserve capacity generators. He said PJM officials think that could increase energy prices 5 to 10 percent if it happens, possibly starting to help nuclear plants within the next 18 months.
Companies can’t plan based on what might happen at some point. Too bad New Jersey’s subsidy law doesn’t include a recapture provision to require the plants to return the subsidy should profits turn out to be much higher than expected.
At least the term for the subsidies is appropriately short — three years. Whatever the BPU’s decision (expected in April), the agency will get to re-evaluate the financials and need for a subsidy in three years, taking into account energy market changes.
The BPU commissioners are in a tough spot. The ratepayer advocate and the market monitor make a strong case for little or no subsidy. The companies insist they’ll close them without one, and the threat must be taken seriously — more than a third of the nation’s nuclear plants are either scheduled to close or at risk of doing so. At least two other states already are subsidizing plants.
Keeping existing nuclear plants open makes sense because nuclear power is essential to meet the state’s and nation’s ambitious goals for reducing greenhouse gases that contribute to warming the climate. Nuclear generation is the only emissions-free power that can be scaled up quickly enough to replace the 80 percent of electricity currently produced by burning fossil fuels. Even environmental groups are starting to support nuclear energy for this reason. The Union of Concerned Scientists is urging that existing plants not be shut prematurely and the Nature Conservancy is calling for nuclear capacity to be expanded.
The problem is evident here in New Jersey. Retiring one of the three plants would increase N.J. greenhouse gas emissions 40 percent, according to the subsidy application, and shutting all three would boost emissions 70 percent. Meanwhile the state is aiming to reduce such emissions by 80 percent by 2050.
A win for the BPU in this high-stakes showdown will consist of keeping the plants open at the lowest cost to consumers and businesses.