SLIDESHOW: Nuclear “Bailout” Trend Gains Traction in More States

Several U.S. states have passed, or are mulling, programs that expand state aid to financially distressed nuclear reactors in a bid to keep them open for economic and environmental reasons. Generators that operate in competitive wholesale markets are perturbed by these measures, which they say amount to nuclear "bailouts."

-Sonal Patel, associate editor (@POWERmagazine, @sonalcpatel)

<>New Jersey. On March 6, three Democratic lawmakers in New Jersey introduced SB 3061 in the state Senate, a bill that directs the state's Board of Public Utilities to study ZECs of about $500 million per year for the state's nuclear power plants, and requires the board to report back to the governor and legislature with its findings.

In a comment on the New Jersey bill submitted on March 20, industry group EPSA commended the bill's sponsors for "not rushing to judgment as ZECs are highly controversial." Public Service Enterprise Group-the state's largest electricity provider-"only started claiming that its nuclear plants may not be recovering their cost of capital to justify future investments and could be cash flow negative by 2020," it noted.

"This is apparently based on a comparison with illiquid forward power prices that may or may not accurately measure future revenues from these plants," it added (EPSA's emphasis). "For starters, if revenues below cost of capital and need to fund future investments are the standards to trigger consumer subsidies, many non-nuclear power plants (including those of EPSA members) would also qualify for out-of-market subsidies. Where would subsidies end?"

The national trade association for independent power producers and marketers also pointedly noted that ZECs are being pushed by utility holding companies that "own both market-based generation and cost-based retail distribution utilities to finance new corporate strategies to boost earnings by exiting competitive generation to focus on more assured earnings from their retail rate-regulated utilities."

The Oyster Creek unit is the oldest operating reactor in the U.S., having begun commercial operations Dec. 23, 1969. Exelon announced the retirement of the 625-MW plant on Dec. 8, 2010. The Ocean County, N.J.-facility is expected to be permanently closed in 2019. Courtesy: Exelon Nuclear

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