As pulp fiction aficionados, we love a good hostage situation.
Last week, New Jersey joined the list of states seemingly eager to bail out politically well-connected nuclear power plant operators. Governor Phil Murphy signed a bill that would grant subsidies of up to $300 million per yearto the owners of the Salem and Hope Creek nuclear power stations, two plants in southern New Jersey approaching the end of their useful lives.
PSEG Nuclear, an affiliate of the state’s largest utility, owns 100% of Hope Creek and 57% of Salem. It made clear that it would not put any new investment into these large, aging power stations without a subsidy, threatening a full closure within a brief period.
As pulp fiction aficionados, we love a good hostage situation. In this case the “hostages” are several thousand utility employees and presumably voters.
The potential adverse economic impact of a power plant closures is regionally significant. State and local governments have become dependent on property and related taxes levied on these facilities. Not surprisingly for this genre the hostages, so to speak, have relatives.
The state legislature’s bill would add a surcharge on electric utility customer bills. This would amount to about $40 per year for a typical residential customer, adding a not inconsiderable 3% to the average electric bill in the state. A ransom is also typical in these dramas.
The nuclear plant’s owners commissioned a study that laid out the supposed costs of a plant closure. It concluded that average electric bills would increase by 3-4%. Retiring plants of this size and type entails two types of expenditures that would be passed along to ratepayers:
- The cost of replacement power.
- Accelerated expenditures for nuclear plant closure.
However, the legislature voted to keep the nuclear plants open and raise customer electric bills by almost the amount that closure would have cost.
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