New Jersey’s Division of Rate Counsel on Monday appealed to the state Supreme Court the dismissal of its suit seeking to block $300 million in subsidies for three South Jersey nuclear units as it continues to oppose a renewal of the subsidies by the Board of Public Utilities.

The Rate Counsel filed a Appeals Court Backs NJ Nuclear Subsidies.)

The ZEC program provides subsidies to nuclear power plants at risk of closure so that they can remain open to generate carbon-free power and help the state meet its goal of reducing greenhouse gas emissions by 80% by 2050. The BPU awarded the $300 million in ZECs to Hope Creek, which is owned and operated by PSEG, and Salem Units 1 and 2, which PSEG operates and co-owns with Exelon. (See NJ Approves $300M ZECs for Salem, Hope Creek Nukes.)

In a separate action on Friday, the Rate Counsel urged the BPU not to renew the ZECs. It argued that the two companies had failed to show that without the subsidies, the nuclear plants would lose money, or that the level of subsidies they are seeking is “affordable to New Jersey retail distribution customers.”

The BPU is expected to vote in the coming weeks on whether to extend the ZECs for another three-year period.

PSEG declined to comment on the Supreme Court petition. Instead, the company referred to its filing with the BPU on Friday that argues that even with the $300 million in ZECs, the companies would not generate enough revenue to cover the “risks inherent in the plants’ operation.” Without a subsidy of the proposed amount, PSEG would “take steps to close the plants,” the company said.

Asked for a comment on the Rate Counsel’s two actions, Exelon referred to PSEG’s response.

Staff Decision Rejected

The three-judge appellate panel made its ruling in response to a suit filed by the Rate Counsel after the BPU first awarded ZECs to PSEG and Exelon in March 2019. The agency, which is charged with protecting ratepayers’ interests, argued that the ZECs were arbitrary and capricious and that none of the plants need them to remain financially viable.

In preparation for the BPU’s 2019 decision on whether to award the ZECs or not, staff found that all three units would operate profitably through May 2022. As a result, staff concluded that they were not eligible for the subsidies.

But the BPU rejected that conclusion. It said the evaluation team had improperly excluded from its calculations consideration of PSEG’s operational and market risks. In dismissing the Rate Counsel’s suit, the appellate court agreed, saying that the legislature clearly intended the BPU to consider the “costs and risks” in considering the eligibility of applicants seeking a ZEC award.

The Rate Counsel told the Supreme Court that it will argue that the BPU made the award based on factors “other than the eligibility criteria” set out in state law. Among the arguments cited by the division were that the appellate court adopted BPU quantification of operational and market risks and costs, rather doing the analysis itself.

It also argued that the appeals court ignored the transcript of the BPU meeting in which commissioners explained the bases of their decisions and “effectively” overruled a past legal decision that required that rates be just and reasonable.

BPU Submissions

The Rate Counsel’s brief to the BPU argues that PSEG’s arguments “fall short” of proving that it needs the subsidy and that it needs to be at the proposed level.

“When the board takes a close look at the evidence in this matter, it is clear that PSEG overstates its projected costs, including the costs of operational and market risks, and understates its projected earnings,” the Rate Counsel said. “PSEG continues to rely on phantom costs that either do not exist or are not paid out as part of its operating expenses.

“Likewise, PSEG understates its revenues, understating both its energy and capacity revenues, while overstating the risk to earning capacity revenues.”

It also argued that PSEG’s calculations of the “emissions avoidance benefits” of keeping the plants open are also flawed because they are based on data for the Eastern U.S. and Canada, rather than areas that directly impact New Jersey’s air quality.

In its own filing, PSEG said that the counsel’s arguments are a simply a “rehash” of those made to, and rejected by, the legislature, BPU and Appellate Court.

PSEG said that the award of $300 million, the “maximum that the current law allows, is justifiable as a bridge to a longer-term solution for these plants that will place them on a firmer financial footing for the duration of their licenses.”

“The continued operation of these plants will significantly reduce carbon emissions and increase the resilience of the state’s energy system, and will do so at a cost per megawatt-hour that is vastly more cost-effective to electric customers than wind or solar,” PSEG said.

“Keeping these plants in operation,” it added, “in fact will keep electricity costs to customers lower than they otherwise would be by hundreds of millions of dollars over the three-year ZEC period.”