Nuclear Bailout Court Decision Was Based On A Secret Record – And It Ignored Huge Prior Subsidies That Appear To Violate The Bailout Law
“Our decision is based on the confidential record.”
I want to make five brief critical points you won’t read in today’s NJ Spotlight coverage of the NJ court’s decision upholding nuclear subsidies.
First, let’s begin with an extraordinary abuse, in footnote #2 on page 10, the Appellate Division admitted that they issued a Kafkaesque secret decision:
The ZEC Act contains a confidentiality provision to protect the information submitted by ZEC applicants … (2)
(2) … the Board issued two versions of its order, decision, and attachments thereto: a public version and a confidential version. Rate Counsel, Exelon, and PSEG Nuclear filed public and confidential versions of their appellate briefs and appendices. Our decision is based on the confidential record.
So, now we officially have secret courts.
Second, and without a hint of irony, the NJ Appellate Division opinion upholding $300 million in subsidies to the nuclear industry begins with a justification in the otherwise toothless 2007 NJ Global Warming Response Act (GWRA). That toothless law has done nothing – repeat, nothing – to mandate any reductions in greenhouse gas emissions, or that big polluters pay one red cent for the damage caused by their greenhouse gas emissions (e.g. the “Social Cost of Carbon”) see:
But, this toothless dead letter has been revived: in 2018 the Legislature, then later BPU, DEP and now the Court used it to justify $300 million/year in corporate subsidies:
In 2007, the New Jersey Legislature passed the Global Warming Response Act, N.J.S.A. 26:2C-37 to -68, having declared that it was in the State’s interest to reduce greenhouse gas emissions by eighty percent by 2050. In furtherance of that goal, in 2018 the Legislature enacted a Zero Emission Certificate (ZEC) program for eligible nuclear power plants, L. 2018, c. 16, codified at N.J.S.A. 48:3-87.3 to -87.7 (the ZEC Act).
Secret courts, nuclear subsidies, and a zombie law. But it gets even worse.
Third, The NJ Appellate Division opinion upholding $300 million in subsidies to the nuclear industry was very narrow in scope. The Court made that very clear: (@ page 15)
Because Rate Counsel does not contend on appeal that the applicants failed to satisfy all of the eligibility criteria, we limit our discussion to those aspects of the applications pertaining to the third eligibility criterion, codified at N.J.S.A. 48:3-87.5(e)(3), financial viability.
For some strange reason, Rate Counsel and the court focused exclusively on this one criterion, despite the fact that the law is far broader and provides:
To be deemed eligible by the Board, a nuclear power plant must meet the following five criteria:
Even the Court found the need to question that narrow focus: (see Opinion at p.31)
Notably, Rate Counsel does not contend on appeal that the applicants failed to satisfy any of the four remaining statutory criteria.
Of the 5 eligibility criteria, what I found to be the criteria that the nuclear industry absolutely could never meet mandates that:
(4) certify annually that the nuclear power plant does not receive any direct or indirect payment or credit [from the state, federal government, or regional compact] . . . despite its reasonable best effort to obtain any such payment or credit, for its fuel diversity, resilience, air quality or other environmental attributes that will eliminate the need for the nuclear power plant to retire, except for any payment or credit received under the provisions of this act;
How could PSEG certify that they get no subsidies?
First, there was the $2.9 bailout of “Stranded assets” back in 1999: (see: BPU Order at p.4)
Additionally, RCR urged the Board to take into account the stranded costs in the amount of $2.9 billion that were paid to PSEG by ratepayers over a 15-year period as a result of deregulation in 1999
The BPU staff documented these additional subsidies to nuclear plants: (See: BPU Order, p. 34-35)
- All merchant power plants, including nuclear plants, receive PJM capacity revenues that are fixed annually three years in advance and help insulate those plants from revenue uncertainty.
- Through the Price-Anderson Act, the federal government provides a layer of insurance coverage for catastrophic accidents at nuclear plants. This reduction in risk and consequential reduction in insurance cost are unavailable for non-nuclear plants.
- The cost of future decommissioning is funded regularly through small contributions to a separate fund. The NRC has strict regulations that require each plant owner to verify that the decommissioning fund for each reactor is sufficient, assuming the funds are collected over the operating life of their plants, or demonstrate financial assurance through another acceptable method. Most plants go into SAFSTOR at retirement, allowing the decommissioning funds to build up (due to interest accruing on the fund investments) while the expected decommissioning costs decline (as radiated equipment and structures cool off). Thus, nuclear plants are largely insulated from retirement cost risks. While non-nuclear plants face much lower retirement costs, they do not have assurance that retirement funds will be available.
In light of these huge subsidies, how could BPU find that there were no subsidies?: (see Opinion @ p.24)
The ET found all three applications were complete, and based on the submitted applications, each applicant had satisfied the first, fourth, and fifth statutory criteria since: (1) each unit was licensed to operate beyond 2030; (2) each unit has not and was not currently receiving any other subsidies; and (3) each applicant paid the requisite application fee.
Why weren’t’ any of these huge subsidies the focus of the Rate Counsel lawsuit?
Why are they never mentioned in news coverage?
How could PSE&G certify they received no subsidies in light of these huge billion dollar subsidies?
What am I missing or getting wrong?
Fourth, the subsidy is justified by: 1) alleged greenhouse gas emissions avoided; 2) alleged “significant and material” greenhouse gas emissions avoided; and 3) compliance with the goals of the toothless GWRA. This is all a joke. Even BPU did not certify any of that.
The BPU and DEP did not even try to make quantitative and legal findings, as the Court noted: (Opinion, p. 39-40)
Although the Board did not expressly state that the applicants had satisfied N.J.S.A. 48:3-87.5(e)(2), the Board’s findings, coupled with the ET’s more detailed determinations, support the implied conclusion that each plant, as a zero-emission facility, makes a significant and material contribution to the air quality in the State by minimizing emissions that result from electricity consumed in New Jersey, minimizes harmful emissions that adversely affect the citizens of the State, and that retirement would significantly and negatively impact New Jersey’s ability to comply with state air emissions reduction requirements, particularly with regard to global warming and ambient air quality. N.J.S.A. 48:3-87.5(e)(2).
The DEP was unable to validate the PSE&G model (see DEP memo at the very end of the BPU Order) of these alleged emissions reductions and the BPU consultant claimed that PSE&G had seriously exaggerated them. Even I was able to see, based on a cursory review, that PSE&G used carbon emission factors for replacement power that were greater than PJM average emissions, thereby greatly exaggerating avoided emissions.
Fifth, there are criminal investigations underway in other States regarding the award of similar subsidies. Even the Wall Street Journal reported:
Why aren’t there similar criminal, legislative, and media investigations underway in NJ?
[End Note:
The Court closed with a real finger in the eye of Rate Counsel’s legal acumen:
The parties’ remaining arguments are without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).
Was Rate Counsel trying to lose?