It was PSEG’s threat to close the three Salem County plants that ultimately secured enough votes to pass the measure. BPU approves $300M nuclear subsidy, despite staff finding no need for it

TRENTON — The state Board of Public Utilities on Thursday voted in favor of charging utility customers an estimated $300 million to subsidize three South Jersey nuclear plants controlled by Public Service Enterprise Group, despite the agency’s own staff finding that the facilities “were not in need of the subsidy.”

The vote was uncharacteristic for the regulatory agency, which historically adopts whatever its staff recommends. On Thursday, BPU staff took the rare step of choosing not to make a formal recommendation and raised several issues with PSEG’s justification of financial need.


Although BPU staff found the nuclear facilities are viable, four of the five commissioners that ultimately control the agency voted in favor of charging residents and businesses $300 million per year to pad the plants’ bottom line. The only commissioner to vote against the subsidy was Upendra Chivukula, who called the ordeal a “disgrace.”

“This is an undue burden on the ratepayers of the state of New Jersey while other options are available,” Chivukula said. “I think it’s a sad day for the state of New Jersey.”

It was PSEG’s threat to close the three Salem County plants that ultimately secured enough votes to pass the measure.

BPU Commissioners Dianne Solomon and Bob Gordon said they were reluctant to approve the subsidy, but voiced concern with making a decision that could eliminate the state’s largest source of carbon-free power. Board President Joseph Fiordaliso and Commissioner Mary-Anna Holden also touted the carbon-free attributes of the power plants in voting for the subsidy.

PSEG notified PJM — the regional transmission operator that includes New Jersey — that it would shut the plants down if the company didn’t get the $300 million subsidy, a threat Gordon likened to being held hostage.

“In my view, the board is being directed to pay ransom and the hostages are the citizens of New Jersey,” he said.

Opponents of nuclear subsidies said it was noteworthy the BPU voted in a way that was contrary to the findings of its own staff.

“Traditionally, the staff makes a clear recommendation and the board follows it,” said Doug O’Malley, director of Environment New Jersey. “It’s actually incredibly powerful because what BPU staff is essentially saying is these numbers did not pencil out.”

PSEG had to demonstrate in its application that it met five criteria to be awarded the subsidy. But PSEG failed to definitively prove it met two of the criteria — that the plants are at risk of shutting down without a material financial change and that they provide a significant contribution to air quality, said Thomas Walker, director of the BPU’s Office of State Energy Services.

If all three plants were to shut down, carbon emissions would increase roughly 9 percent in the state, Walker said. But, he said, there’s no industry standard as to whether that increase in emissions qualifies as “significant,” so staff deferred judgment to the commissioners.

BPU staff was more definitive in its finding that the plants didn’t financially qualify for the money.

“The eligibility team, quite frankly, determined that the units are financially viable as they stand now in current market conditions and that they were not in need of the subsidy,” Walker said.

Thursday’s vote caps a more than one-year saga that aligned environmentalists, oil and gas interests and fiscal watchdogs in opposition against PSEG.

PSEG has pushed for the zero-emission credits for years, and started a heavy lobbying effort in 2017 to push a bill through the Legislature that would allow for the creation of nuclear subsidies. The company has repeatedly warned the plants are in financial danger due to competition from cheap natural gas.

After months of delay and debate, Gov Phil Murphy signed the legislation into law in May 2018. The bill allowed nuclear plant operators to apply to recover $0.004 per kilowatt-hour from ratepayers, amounting to the $300 million annual figure.

But the bill’s language was criticized by BPU commissioners at Thursday’s hearing. Gordon and Solomon both expressed discontent that the agency was unable to adjust how much PSEG would receive.

“Unfortunately, the Legislature and governor did not give us the authority to determine the amount of the subsidy for nuclear generators,” Solomon said. “I am therefore required to make a Hobson’s choice.”

Stefanie Brand, director of the Division of the Rate Counsel, said she disagrees that the BPU could not have adjusted the rate and may use that assertion to pursue a legal challenge. Brand has said the BPU could adjust the subsidy amount as an agency tasked with setting just and reasonable rates.

“I think they kind of made my case for me there because it was clear that at least the majority of them did not deem this rate just and reasonable, so they have now approved a rate that they have told us they don’t think is just and reasonable,” Brand said. “I guess we’ll have to get a court to look at whether or not that is ok.”

The BPU’s approval of the nuclear subsidy takes effect immediately. Utility customers could see the charge on their next monthly bill.

The subsidy will cost the average residential customer approximately $28 per year, BPU spokesperson Peter Peretzman said. He did not provide a figure for how much it could cost more energy-demanding businesses.

The subsidy will last for the next three years, after which PSEG would have to reapply for the money.

PSEG spokesperson Mike Jennings declined to speak with reporters immediately after the hearing, but later sent a prepared statement that read, “We are pleased with the decision to award ZECs to PSEG to help support New Jersey’s primary supply of zero-carbon electricity.”

“Our next step is to review the decision to better understand today’s decision in greater detail,” the statement read. “We appreciate the Board’s detailed review and consideration of PSEG Nuclear’s ZEC applications.“