New Jersey’s Board of Public Utilities shut down its third offering of nuclear subsidies after PSEG Nuclear and Constellation Energy Generation, which operate the state’s three nuclear plants, opted to not apply for state subsidies as they seek federal support. 

The board’s unanimous vote Feb. 14 quietly ended a process to determine support for the three South Jersey nuclear plants — Hope Creek, Salem 1 and Salem 2 — that in the last subsidy process triggered a contentious debate over whether the plants needed the financial break to remain in existence. 

The Zero Emission Certificate (ZEC) program provides subsidies to nuclear power plants at risk of closure so they can remain open to generate carbon-free power. A ZEC in New Jersey compensates the nuclear plant for generating one megawatt-hour of electricity, with funds collected by the utilities from ratepayers at a rate of $0.004 per kilowatt hour (kWh). 

In the 2022 discussions to decide subsidies for the current three-year period, which covers 2023 to 2025, critics argued that the plant operators did not need the maximum possible subsidy of $300 million to remain in business. The BPU, which under the law could have reduced the amount, nevertheless awarded the maximum. 

The BPU said in the Feb. 14 order that the third offering, which the board opened Aug. 21, would be closed because there were no applications once PSEG and Constellation withdrew. The offering would have awarded subsidies from June 2025 to May 2028. 

Doug O’Malley, director of Environment New Jersey, called the move a “win for ratepayers” that means the funds that might have gone to the nuclear plants in the future now can support other forms of clean energy generation. 

“We do need to obviously move towards an energy future that isn’t necessarily dependent upon” aging nuclear plants, he said. 

Maintaining Options

PSEG — the sole owner and operator of the Hope Creek plant and the operator and majority co-owner of Salem 1 and Salem 2 plants — submitted a notice of intent Aug. 21 to file for ZECs for the three plants. So did Constellation Energy, the minority co-owner. 

But both companies withdrew from the ZEC process. In a Nov. 22, 2023, letter to the board, PSEG said its earlier notice of intent was “filed to preserve PSEG’s rights” while it pursued federal production tax credits (PTC) due to be awarded to nuclear power generators under the 2022 Inflation Reduction Act. 

PTCs create a credit of $15/mWh for electricity produced by existing nuclear plants, beginning at the start of 2024 and running through 2032, according to the Nuclear Energy Institute. New Jersey paid $10/MWh in its two awards. 

PSEG said the federal program would “impact” the state ZEC program, and at the time the utility filed the notice of intent, it was awaiting “further clarity” from the Treasury Department of final rules regarding implementation of the PTC. 

“While those rules have still not been issued, PSEG has determined in light of all relevant facts and circumstances, including the purpose of the PTC established by Congress for qualifying nuclear facilities, that at this time the company does not intend to file applications in this (New Jersey’s) proceeding with respect to its three nuclear generation units,” the letter said. 

Constellation submitted a similar letter to the BPU on Nov. 30. 

PSEG released a statement Feb. 15 saying that though the Treasury rules for the PTC program still have not been issued, the company “has confidence that the PTC will proceed as intended and sufficiently support the nuclear generating units.” 

The statement added that the company remains committed to “providing carbon-free, reliable and affordable sources of power generation and will revisit the need for ZECs if federal support of the industry is insufficient.” 

Former CEO Ralph Izzo, who stepped down in 2022, suggested at least twice before he left that the company was looking to the federal government for support for the nuclear plants, adding in May 2022 that it would “reduce the pressure on New Jersey customers.” (See PSEG Sees Potential $3B OSW Transmission Spending.) 

Net-Zero Reliance

Nuclear-generated electricity accounts for about 35% of the state’s power at present, with solar power contributing 7%. The state has no wind power yet online. State officials and environmental groups say maintaining the nuclear plants’ operations will be key to helping the state achieve the goal set by Gov. Phil Murphy (D) of 100% clean energy by 2035. 

The Legislature created the program in 2018, and the board in 2019 awarded ZECs totaling $300 million to the three South Jersey nuclear plants in the first award under the law. (See NJ Approves $300M ZECs for Salem, Hope Creek Nukes.) 

In the next award in 2022, covering the period from June 2023 to May 2025, state law allowed the BPU to set the size of the award. But PSEG said in discussions leading to the award that it would close the plants unless it received the $10/MWh rate, which is the maximum the program allows and the amount the BPU awarded. 

That sparked criticism from the New Jersey Division of Rate Counsel, the state’s consumer advocate, and environmental activists, some of whom said PSEG had exploited its market dominance to extract an unnecessarily large payoff. Some BPU commissioners also expressed concern at the size of the award but said the environmental and financial cost of not awarding the ZECs would be too great. (See New Jersey Nukes Awarded $300 Million in ZECs.) 

Rate Counsel Opposition

After the award, the Division of Rate Counsel filed an appeal of the awards to the Appellate Division of the state Superior Court, which rejected the claim in a Dec. 4 ruling.  

The rate counsel argued the BPU failed to do a thorough review of the case and disregarded “expert opinion that the three plants miscalculated their revenues, costs and risks, whereas a correct accounting demonstrated the plants did not need subsidization.” The Appellate Division concluded the board’s findings that underpinned the award were supported by “substantial evidence.” 

Brian O. Lipman, director for the Division of Rate Counsel, welcomed the closure of the ZEC process for another three years. 

“It’ll be good news for ratepayers, especially the commercial/industrial in the state because this was a major impact on their bill,” he said, and reiterated the belief expressed in the court arguments that the plants did not need subsidies to survive. 

“I do think that to the extent subsidies are needed, this is more of a federal issue, which should be dealt with at the federal level,” he said. “Ratepayers should not be paying subsidies for nuclear power plants in New Jersey.”