New Jersey BPU pulls plug on unpopular nuclear subsidy

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The Hope Creek nuclear power-generating plant in Salem County

An unpopular surcharge on every New Jersey utility customer’s monthly bill — amounting to $70 annually for the typical homeowner and much more for manufacturers — will end next year when the state eliminates a $300 million annual subsidy aimed to keep its three nuclear plants from closing. 

The state Board of Public Utilities on Wednesday adopted an order directing the utilities to stop collecting the surcharge, effective June 1, 2025. The subsidy, enacted in 2019 after a bitter legislative fight, has raised about a half-billion dollars thus far, for Public Service Enterprise Group and Constellation Energy, the owners of the units in South Jersey. 

The energy companies had submitted applications to the BPU to continue the surcharge for another three years but decided to withdraw from the process in late November. No one else applied for the subsidy, dubbed zero-emission certificates (ZECs), leading the agency to cancel a third round of any ratepayer-supported subsidies. 

Feds to pick up tab  

PSEG and Constellation are expected to replace the subsidy with federally funded production tax credits (PTCs) created by Congress and the Biden administration. In a statement, PSEG said while the rules from the U.S. Treasury Department still have not been issued, the company is confident that the PTC will proceed as intended and sufficiently support the nuclear generating units. 

The three nuclear plants — Salem I, Salem II, and Hope Creek — are an integral part of the Murphy administration’s clean-energy plan, providing 30% of the carbon-free electricity in the state. If they stopped operating, New Jersey would never achieve its aggressive goals of cutting carbon pollution by 80% below 2006 levels by 2050, according to state officials. 

‘This wasn’t needed. Now, with federal dollars kicking in, it should end sooner and give ratepayers a break.’ — Jeff Tittel, longtime environmental activist 

PSEG won the subsidies in 2019 after a long legislative battle that began during the Christie administration and was achieved early in Gov. Phil Murphy’s term. PSEG repeatedly threatened to close the plants, which employ more than 6,000 people, if state aid was not forthcoming.

In withdrawing their applications, the companies are counting on winning lucrative production tax credits from the Biden administration’s Inflation Reduction Act, a law passed by Congress in 2021. The tax credits are expected to be available sometime this year. 

Big bills for big businesses  

Currently, the surcharge amounts to roughly $70 a year for typical residential customers but can run as much as tens of thousands of dollars or much more for businesses that use a lot of energy. At the time the surcharge was adopted, at least six nuclear plants had shut down, unable to compete with cheaper sources of electricity, primarily natural gas. 

The surcharge was widely supported by major business groups and many prominent environmental organizations, primarily as nuclear was the largest source of zero-emission electricity at the time. 

Dennis Hart, executive director of the Chemistry Industry Council of New Jersey, noted manufacturers pay an added $78,000 to $586,000 because of the surcharge.

At the same time, the Division of Rate Counsel, an independent monitor for the regional power grid, and consumer advocates argued unsuccessfully that the plants were profitable and did not need any subsidy, a stance endorsed by a consultant hired by the BPU. The agency nevertheless approved an initial three-year subsidy, followed by a second one in 2021.

Jeff Tittel, a longtime environmental activist who was president of the state’s Sierra Club at the time, said the ZEC program should have never been approved.

“This wasn’t needed. Now, with federal dollars kicking in, it should end sooner and give ratepayers a break,’’ he said. 

The board had no comment on Wednesday in cancelling the third round of funding for ZECs.  

The right time for a rate reduction  

But the pending cut in utility bills is viewed by many as a positive step, given a series of rate increases approved by the agency as part of the clean-energy transition and push to modernize the power grid. 

‘It’s very good news,’’ said Brian Lipman, director of the Division of Rate Counsel a vocal critic of rising electric and gas bills. “For three years, this surcharge will fall off customers’ bills and hopefully will stay off.’’ 

In its order, the BPU left the door open for a fourth eligibility period to qualify for ZECs, beginning June 1, 2028 and ending May 31, 2031. “Who knows what happens three years from now? Who knows if the nuclear plants need subsidies or not?’’ asked Lipman. 

PSEG noted it would revisit the need for ZECs if federal support for the industry is insufficient. 

Dennis Hart, executive director of the Chemistry Industry Council of New Jersey, noted manufacturers pay an added $78,000 to $586,000 because of the surcharge. “These rates are unsustainable, and the reductions will go a long way towards maintaining the important jobs and economic benefits of manufacturing in New Jersey,’’ he said. 

Under state law, any money received from the federal government is to be used to offset the cost of the ratepayer surcharge, if both are awarded at the same time. There is $30 billion available under the federal production tax credit. 

Rich Henning, president of the New Jersey Utilities Association, said this is what many energy officials have been seeking for some time. “From a standpoint of customers, utilities and power companies, it is a win all the way around,’’ he said. 

“It highlights the federal support for nuclear power,’’ said Paul Patterson, an energy analyst at Glenrock Associates. 

In the meantime, energy rates continue to rise elsewhere. The BPU approved an $85 million increase in revenue for Jersey Central Power & Light, a step that will raise bills for its customers by an average of $4 a month per homeowner. In addition, New Jersey Natural Gas filed a $225 million rate petition with the BPU, which will, if approved, raise rates by $29 a month.