FERC Move Could Undermine NJ Clean-Energy Policies

Source: By TOM JOHNSON, NJ Spotlight • Posted: Friday, August 10, 2018

Ruling by Federal Energy Regulatory Commission that state subsidies of nuclear and renewable energy are ‘unjust and unreasonable’ could unravel range of NJ energy initiatives

With two new laws this spring promoting nuclear and clean energy the Murphy administration moved aggressively to combat climate change, but a decision by a federal agency may end up thwarting those policies.

The action by the Federal Energy Regulatory Commission this past June could have huge implications for how much customers pay for electricity to power their homes and businesses, and undermine state policies aimed at reducing greenhouse gas emissions.

In New Jersey, the state Board of Public Utilities last week asked FERC to reconsider the decision, a step also requested by the operator of the nation’s largest power grid, some of the biggest energy companies in the nation, as well as a coalition of the most prominent environmental organizations.

The long-running dispute revolves around what power suppliers are paid for providing extra capacity in reserve to supply electricity to the grid when energy demand peaks. State policies that provide incentives to nuclear plants and renewable energy are depressing those prices, according to some suppliers. The result has led to the early retirement of both coal and nuclear power plants.

‘Unjust and unreasonable’

In its decision, FERC ruled that a current tariff that sets prices for power suppliers within the PJM Interconnection — which serves the nation’s largest electricity market with 65 million people — is “unjust and unreasonable.’’ In essence, the agency sided with Calpine, the owner of a fleet of natural-gas plants, which argued that state subsidies to nuclear and renewables artificially drive down prices.

For New Jersey, the order by FERC could unravel long-standing legislative initiatives to promote cleaner sources of energy like solar power, as well as the state’s proposed subsidies to keep nuclear power a part of its energy mix by having ratepayers subsidize plants it deems uneconomic.

By 2050, the Murphy administration wants 100 percent clean energy. Since the turn of this century, the state of New Jersey has provided significant subsidies to promote such resources, primarily solar energy, as have many other states through mandated use of renewables via Renewable Portfolio Standards. Dubbed RPS, they require utilities to buy a proscribed and growing percentage of electricity from renewable energy.

In its order, the federal agency targeted two state programs: a program to bolster economically challenged nuclear power plants and state mandated RPS programs, according to a brief filed by environmental organizations.

Where’s evidence to support federal move?

The state’s clean-energy goals were enhanced in May when Gov. Phil Murphy signed two laws to provide subsidies to nuclear power plants and ramp up the state’s reliance on renewable energy. By 2030, the state wants half of its power delivered from clean energy, according to one of the bills.

“The record shows that state policies are not a new or evolving crisis in PJM,’’ the BPU said in a brief filed this week. “In New Jersey, the state policies are driven by environmental concerns; largely aimed at reducing emissions and combatting climate.’’

The federal commission’s determination, the BPU argued, “frustrates even longstanding and lawful state policy by identifying them as price suppressive,’’ without any evidence to support that claim.

PSEG disputes findings

Others disputed the commission’s finding that state policies are suppressing prices, including Public Service Enterprise Group, which stands to benefit from the new law giving subsidies to nuclear power. During an earnings’ call this week, the owner/operator of three plants in South Jersey told analysts they expect to begin receiving $200 million in zero-emission credits (ZECs) next April.

PSEG argued, in a brief it submitted, that rather than interfering with state policies that factor in “externalities’’ associated with power plants that contribute to climate change, the commission should accommodate those efforts.

“The ability to pollute while generating electricity without paying the cost of pollution, is, from the standpoint of economics, a subsidy,’’ the company said in its brief. It suggested the cost of the subsidy ranges from $12.1 billion to $17.7 billion a year.

PSEG Power, a subsidiary of the PSEG, is building or has completed recently three new natural gas plants — in New Jersey, Maryland and Connecticut.

According to a filing by the Natural Resources Defense Council, Earthjustice, the Sierra Club, Environmental Defense Fund and others, the FERC order could prop up fossil-fuel plants while blocking state climate policies to promote solar, wind and other renewables.

New Jersey Rate Counsel director Stefanie Brand, however, argued the biggest impact may be on nuclear power, potentially eliminating the ZECs to bolster the plants, or even end up forcing customers to pay more. “We don’t know the answer yet, but it’s of great concern,’’ Brand said.