Electricity Wars in NJ

FERC, PJM Interconnection and the Obama administration are at war with New Jersey electricity consumers.  But, as the outgoing chairman of the NJ Board of Public Utilities, Lee Solomon, said this week:

“We mean business,” he vowed. “We are not messing around.”

NJ political leaders and regulators have been struggling for years to get out from under the iron heel of the PJM cartelA recent story in the NJ Spotlight explains the situation very well:

The friction between the state and other regulatory authorities stems from the high prices New Jersey consumers pay for electricity, typically ranking in the top 10 highest costs paid by businesses and residents. The Christie administration is pushing to build new power plants as a way of lowering those costs, primarily by reducing congestion on the power grid, which spikes power prices, particularly in northern New Jersey.

Accusing FERC of protecting incumbent generators, Solomon said of an April decision by the agency to revamp its rules: “The reality is their decision guaranteed that we will not get new entry in New Jersey. That, to me, stinks,” said Solomon, adding the outcome was so obvious, it makes it “so much more offensive.”

The irritation revolves primarily around a new pricing system imposed by PJM in 2007, aimed at encouraging power plants to be built where needed. They system, known as the Reliability Pricing Model (RPM), has provided a lucrative new source of revenue for incumbent generators; prevented the retirement of older, less efficient and more polluting power plants; and, in some cases, reactivated previously closed plants, according to the staff report.

“RPM instead appears to have simply enriched incumbent generators and imposed substantial costs on New Jersey consumers,” according to the staff report, which estimates ratepayers will shell out $11.3 billion from the time the system was implemented until 2015 to provide the needed capacity to keep the lights on. “Unlike normal transactions between buyers and sellers in other markets, the RPM market has charged New Jersey customers handsomely for goods it has not delivered,” the report added.

That “incumbent generators” refers to AEP and FirstEnergy, the giants that dictate transmission and generation policy in PJM.  AEP/FE’s power can be easily gauged by how hard PJM was willing to fight for the Project Mountaineer PATH line, which had no benefit whatsoever for rate payers in the PJM region.  PJM is all about maintaining high cost, polluting coal plants owned by AEP and FE at the expense of new gas-fired plants and offshore wind power on the east coast, where new generation is desperately needed.

Congress and the Obama administration have joined the fight to support the “older, less efficient and more polluting power plants” by blocking the continuation of incentives for investment in new wind power production on the east coast.  While giving lip service to the idea of constructing offshore wind farms, the Obama administration has failed to take the practical steps the US needs to make offshore wind a reality.

With his attack on EPA air pollution regulation, President Obama has continued the massive subsidies to the coal fired power industry that are killing Americans every day.  At the same time, the President cowers at the slightest Republican attack on renewable power incentives.

Well, now NJ is paying the cost.  The owner of Bluewater Wind is pulling out of offshore wind projects that were going to help NJ solve the problems that PJM had created.  Here is the story, again from NJ Spotlight.

In talking about the decision, Peter Mandelstam, president of NRG Bluewater, said the move was based on a confluence of factors. Primarily, these were uncertainty about continued federal support from federal tax credits and federal production credits, which are due to expire at the end of 2012, as well as a decision by Congress to eliminate funding for a U.S. Department of Energy loan guarantee program for offshore wind.

Those same factors are likely to raise serious questions about the ability to move the other wind projects proposed off the Jersey coast forward, according to energy industry analysts.

“Offshore wind will not happen unless there are copious amounts of government support,’’ said Paul Patterson, an energy analyst with Glenrock Associates in New York City. “It’s all a question of the subsidy. That is what comes down to.’’

Subsidies for coal?  Keep ’em coming.  Subsidies for renewable power?  Nope.  That’s our federal energy policy: high cost, high pollution, obsolete technology.

One thought on “Electricity Wars in NJ

  1. “incumbent generators” getting rich = more Allegheny/FE than AEP if it can be judged by the actions of incumbent generator front group COMPETE, who is furiously meddling in this issue in New Jersey on behalf of the incumbents. Near as I can figure, AEP isn’t a part of it (and COMPETE has also been fighting with AEP over dereg. in Ohio).

    COMPETE’s real purpose to to protect the monopoly revenues of its incumbent generator members, not to “foster competition.” They’re the worst kind of front group — masquerading as fostering competition when their true aim is to stifle it. They must think regulators and elected officials are dumb.

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