PSEG Warns Shutting Down Nuclear Units Could Drive Up Power Prices

Company head continues to sound drumbeat for nuclear subsidies, even though plants will remain profitable through 2019.

The closing of nuclear power plants serving New Jersey could lead to higher electricity prices for consumers, according to Ralph Izzo, chairman, CEO, and president of Public Service Enterprise Group, the owner of the units.

Izzo, speaking Friday on a quarterly earnings call for the Newark energy company, continued the drumbeat of lobbying for incentives to subsidize the operation of the three units run by the company’s subsidiary, PSEG Power, in South Jersey.

“You cannot remove 40 percent of the supply without having an increase in prices in New Jersey,’’ Izzo said, in response to a question from a Wall Street analyst. “And that’s something New Jersey consumers should not like.’’

PSEG Top Priority

The issue of potential subsidies for PSEG’s fleet of nuclear units in New Jersey has emerged as a top priority for the company as it lobbies state lawmakers and policymakers with the regional power grid and at the federal level with the threat of retiring them if financial help is not forthcoming.

The debate over any incentives is likely to shift eventually to the Legislature where opposition to any kind of subsidies — similar to ones that have been handed out in other states — is building among consumer advocates, businesses, and some environmentalists.

They argue the company has failed to demonstrate the plants are not profitable, and question whether any subsidies would be legal — given that the courts repeatedly blocked efforts by New Jersey (during the first term of Gov. Chris Christie) and other states to give incentives to natural-gas plants. PSEG joined much of the energy sector in opposing those subsidies.

No specific proposal has been made public, and Izzo dodged a question from an analyst asking what type of subsidies the company is seeking, citing incentives awarded in New York and Connecticut. In the former, ratepayers will pay a half-billion dollars annually to support nuclear.

Izzo described the talks in New Jersey as in an education phase, explaining the value of nuclear in terms of the value of fuel diversity, generating electricity without air emissions, and providing good jobs.

“And I just have a lot of confidence that New Jersey will give it serious thought. I mean, the issues are pretty clear here,’’ Izzo said, repeating something he said earlier this year at an investor’s conference. “If those assets are not earning their cost of capital over the long term or if they turn cash flow negative, we’ll retire them.’’

Nuclear currently profitable

Currently, as PSEG concedes, the plants are profitable, unlike other nuclear units, which have shut down around the nation, unable to compete with cheap natural gas and higher costs for security and maintenance.

On the earnings call, PSEG executives said the units will remain cash-flow positive at least through 2019, but worry that price curves in the volatile energy marketplace will turn negative as soon as 2020.

PSEG declined to say when it would make a decision on the plants. “We haven’t drawn a line in the sand,’’ Izzo replied to an analyst’s question, but later talking to reporters noted nuclear plants take time to be shut down and retired.

Discussions focusing on the future of nuclear power are taking place now in states; at PJM Interconnection, the operator of the regional power grid; and in the federal government, including the Department of Energy. It is more likely solutions will be shaped at the state level first, which would then give way to either regional or federal policies, Izzo said.

In New Jersey, no specific legislation to give incentives to nuclear units has been introduced, with most opponents of the issue fearing it is most likely to be taken up in a lame-duck session after this fall’s gubernatorial election.

Original Article