PSEG’s Izzo Blasts Power Company Opposition to Revived New Jersey Nuclear Subsidy Bill

Public Service Enterprise Group (PSEG) President and CEO Ralph Izzo gave NRG Energy a tongue-lashing for its pointed opposition of subsidies for PSEG's two New Jersey nuclear power plants. The tense moment at a January 25 legislative hearing that sought to revive the measure is illustrative of a growing chasm within the power sector about the role of state initiatives for nuclear power within competitive markets.

The hearing before the state Senate Environment and Energy Committee effectively restarted the legislative process to establish nuclear subsidies in New Jersey. Lawmakers unveiled S877, a bill introduced on January 9 that is similar to S3560, on which the full state Senate was scheduled to vote on January 4-just three weeks after it was introduced. The original bill died during the state's lame-duck session without action, due to delays caused by a blizzard and bitter infighting among Democrats that head up New Jersey's Senate and Assembly.

However, owing to last-minute revisions, stakeholders at the hearing on Thursday didn't see the revamped 50-page bill until the hearing began, prompting committee chairman Sen. Bob Smith to announce that a vote would not be held on S877. It was instead referred to the state Senate Budget Committee for a vote on February 5.

Disputing the Fate of Two Nuclear Plants

S877 essentially directs the Board of Public Utilities (BPU) to issue Nuclear Diversity Certificates (NDCs) to nuclear power plants selected by the board to participate in the program. Each NDC would represent the environmental and fuel diversity attributes of 1 MWh generated by an eligible plant. To participate in the NDC program, a nuclear plant would have to meet a set of criteria, which includes demonstrating that the facility makes a significant and material contribution to the state's air quality by minimizing emissions that result from electricity production, and providing financial information to certify that the plant would cease operation within three years without material financial changes. The new bill ensures that PSEG will provide the BPU with financial information it seeks, though it also outlines strict confidentiality provisions related to that data.

Compared to S3560, the bill also raises New Jersey's renewable portfolio standard and adds community solar with virtual net metering, energy efficiency, and offshore wind. These additions are to address concerns raised by freshly elected Gov. Phil Murphy (D), who Senate President Stephen Sweeney-another Democrat-accused of thwarting the measure during the last session. Also embroiled in that political spat is Assembly Speaker Vincent Prieto, who hesitated to post the bill for a vote as it drew to the close during the last session, reportedly owing to Murphy's concerns.

The measure has been championed by PSEG, which says its 2.3-GW Salem and 1.2-GW Hope Creek nuclear generating stations need subsidies even though they are currently profitable. In December, Izzo warned state lawmakers that while the plants were able to pre-sell electricity over the past three years under contracts that are above current market prices, some of those contracts expired in 2017 and most others would end in 2018.

"Unless market prices change, we will no longer be covering our costs within the next two years," he said. "Without intervention-without a thoughtful, economic safety net-PSEG will be forced to close its New Jersey nuclear plants."

A Swath of Contention

On Thursday, a variety of energy executives, labor officials, and environmentalists outlined their views about the contentious measure. Among them was Stefanie Brand, director of New Jersey's Division of Rate Counsel, who voiced concerns because the division is only authorized to participate in proceedings involving regulated companies.

"From all indications, these plants are profitable," she said. "We have to be included in this inquiry or it's a sham."

Environmental groups, predictably, said the bill's measures don't do enough to advance the state's clean energy goals. For example, Jeff Tittel, director of the New Jersey Sierra Club, said, "There is nothing in here on energy efficiency and renewable energy that is not already policy of the state. " The whole thing is a green scam to justify a massive nuclear subsidy."

Mary Barber, who heads up the Environmental Defense Fund's New Jersey Clean Energy arm, echoed Tittel's concerns, urging lawmakers to ensure a more detailed independent review before it establishes nuclear subsidies.

Energy executives from NRG Energy and Calpine-both part of the "New Jersey Coalition for Fair Energy," which comprises independent power producers that have legally challenged nuclear subsidies implemented in New York and Illinois-outlined a number of contentions, mostly focused on the role subsidies would play in prioritizing nuclear power within PJM Interconnection's competitive wholesale market, which covers all of New Jersey.

Ray Long, vice president of National State and Federal Government Affairs at NRG noted his company, one of the largest independent power producers in the nation, owns a fleet that uses diverse fuel sources, including nuclear, coal, gas, wind, and solar. It also has one of the most aggressive carbon reduction goals in the industry, he said.

"We are not 'anti' any one particular technology," he said. "But having all of those [fuel sources] and operating them very well, I think we have a unique perspective on this issue." Giving nuclear plants owned by PSEG and Exelon Corp. what is tantamount to an out-of-market subsidy gives them an "unfair advantage in the marketplace," he said. "So putting it in very blunt terms, it creates one winner-the nuclear plant owners-and everybody else who doesn't participate, loses."

NRG, like PSEG, is dealing with the proliferation of shale gas and the rapid expansion of renewables that has tamped down wholesale power prices and is "squeezing out generators," Long said. But NRG isn't seeking subsidies, and it is instead focused on improving operational efficiencies to stay competitive or shutting down facilities that are not profitable and investing in more competitive technologies, he noted.

Long compared these new technologies to an Apple iPhone. "We're not coming to you and saying, 'Oh you know what, we really like our dial-up phone, and we want you to continue to subsidize it going forward so that we don't need to invest in anything new.'"

For Long, New Jersey's fast-tracked consideration of the nuclear subsidies amounted to "putting the cart before the horse," and he called for further state-commissioned study of the issue by economists before it was codified. Every other state conducted a thorough study for at least two years before executive or legislative action on subsidy measures. For more than two years, Connecticut has assessed justification to move forward with a zero-emission-credit solicitation for Dominion's Millstone station, its only nuclear plant, Long pointed out. In New York, concerns are mounting about costs associated with subsidies, and in Illinois, a bill may be in the works to repeal the zero-emission program because of costs to southern Illinois constituents, who may wind up paying for it, he said.

"So, there's some serious buyers' remorse going on in some of these states, even where some of these studies have been done."

"This bill clearly launches a rapid process, on which the Committee said it's made up its mind, that establishes a 'non-bypassable, irrevocable' charge on customers," NRG Energy spokesperson David Gaier said in a statement e-mailed to POWER on January 26. "Bottom line is that [as] early as this year, New Jersey ratepayers will likely suffer even higher rates, all for the benefit of a single company.

Izzo Loses His Temper

Responding to arguments opposing the measure, Izzo conceded that concerns voiced by environmental and ratepayer groups were for a greater good. But in an impassioned speech, he railed against statements made by NRG and Calpine, calling them a "parade of nonsense" that was "outright misleading." Izzo later apologized for losing his temper.

Addressing NRG pointedly, he said: "To stand here before [the committee] and to suggest that their 300 employees that they have in one building here makes them a better corporate citizen than the 11,000 people we've had in this state for 100 years infuriates me. For them to stand here and say to you that they are reducing their carbon footprint when they are one of the largest coal-burning producers in the country infuriates me," he said.

Izzo also lambasted NRG's opposition to subsidies, suggesting it was hypocritical: "For them to talk to you about these subsidies that are unfair for us, great, let them come here and request a carbon tax on their gas plants and see who wins that battle. Because at a social cost of carbon of $35/ton, the $17/MWh they'll have to pay-we will bury them.

"Let them come here and tell you about the solar subsidies that they collect without having to show their books throughout this state, putting those solar panels on houses of people with higher average per capita income than the average New Jerseyian. I won't tolerate that sort of nonsense coming from a company that's been here 14 years, because their CEO didn't want to live in Minnesota any longer."

To Calpine's claims that the PSEG plants were profitable, he asked: "How do you know we're making a ton of money if we're not showing you the books? Not one penny will come to my company until the BPU says every bit of data they need has been shown to them and we need those plants because they don't want 15 million tons of carbon, they don't want to lose 2,000 jobs, and they don't want power prices to go up by $400 million in the state of New Jersey," he said. "And I put our record up against any one of our competitors, any time, on the record," he stressed.

Izzo added that PSEG's financials had softened over the past 10 years, owing to lower power prices, but he claimed nuclear subsidies would benefit the public. "Our share price today is where it was in 2008. Our earnings this year are 6% below where they were in 2010," he said. "That's not something a CEO boasts about. The reason for that is very simple: The lowering of power prices that have benefitted our customers and have hurt us as a company. The jobs in the state are important to us. If you close these plants, many, many more jobs are at risk than just the 1,600 at our facilities. Many of the people who don't want to see their power prices go up will see even bigger increases in their power prices."

Finally, in a softer stance, addressing concerns that the subsidies would raise rates, Izzo said that PSEG was open to re-regulation. "If we want to have a full public process and have Miss Brand and others get the full record on the plant, let's re-regulate them. It's fine. We're more than willing to do that. That's basically what the DOE proposed and we testified in favor of that," he said. "NRG testified in opposition to that."

-Sonal Patel is a POWER associate editor (@sonalcpatel, @POWERmagazine)

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