A standing room only crowd of witnesses argued pros and cons for hours over a deeply controversial bill that would make ratepayers subsidize PSEG’s nuclear power plants in Salem County at an estimated cost of $280 million a year. Without the subsidy, PSEG claims that even though its plants are profitable now, competition from cheap natural gas will force them to close in two years. If the plants close, New Jersey would lose up to 40 percent of its power supply.
“The laws of supply and demand simply say when you don’t change demand, and you eliminate 40 percent of supply, prices go up. The two studies independently put that number at $400 million a year,” said PSEG’s CEO Ralph Izzo.
“If Nuclear is eliminated, 90 percent of our electricity in New Jersey would be provided by natural gas. That’s putting all of your eggs in one basket. It’s very important to have diversity,” said Ed Salmon, a former president of New Jersey’s Board of Public Utilities.
“We don’t want to see these plants close, either. All of the assumptions in these reports he’s talking about assume the plants are going to close. But, I challenge that assumption … ,” said Stefanie Brand, director of the New Jersey Division of Rate Counsel.
Brand accused the utility company of holding ratepayers hostage, forcing them to pay an estimated $41 per year more for the average residential customer. She told lawmakers on a joint Senate and Assembly committee that PSEG is not entitled to better profits at ratepayer expense.
“I know they’re saying we’re not making enough money, but I have no ability to test that, nobody has the ability to test that. In this bill, the horse is out of the barn before anybody has a chance to do that,” said Brand.
“I’m heartened by the fact that she wants proof they are at financial risk, and that’s what this bill allows you to do,” said Izzo.
But other witnesses testified that PSEG has hedged its financials to cover losses and that the bill could yield a windfall for its investors, especially if the utility earns federal subsidies through the regional PJM power grid.
“Any support from the state, to owners of nuclear power plants in New Jersey, will simply flow to the equity investors who have already received very high returns on their investment,” said Tanya Bodell, the executive director of Energyzt.
“The bill does not provide for PSEG paying its customers back if they earned more than the target amount,” said Joseph Bowring, an independent market monitor at PJM.
The bill puts New Jersey’s Board of Public Utilities in charge of examining PSEG’s finances and deciding whether to grant the subsidy, called a Nuclear Diversity Certificate, within 500 days of application.
“I don’t trust them to do the right thing, here. Unfortunately, that’s been the case for too long, that they’ve been a rubber stamp for the industries they’re supposed to regulate,” said Director of the NJ Sierra Club, Jeff Tittel.
But the bill’s backed by Senate President Steve Sweeney, whose legislative district would lose some 6,000 jobs, including a pregnant engineer, named Jennifer Tutterow, who broke down crying over the personal impact.
“That’s one of the things I wanted to bring to the table, both those of us that work there, friends and family, and the next generation,” said Tutterow.
Sweeney argued the process offers plenty of safeguards and does not guarantee subsidies.
“There’s been a lot of discussion about that this is an auto handout to the utility and that’s not true. This bill creates a process for the BPU to review the finances of the utility to make sure it can function and stay operational,” said Sweeney.
As expected, the committee voted to release the bill. It will sit over the holiday recess and is headed for a vote in early January, the waning days of this lame duck legislature. If it passes, it could be the last major piece of legislation Gov. Chris Christie signs.