New Jersey Considers Options to Fund Nuclear Generation

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In an effort to promote the development of advanced nuclear reactors in New Jersey, the New Jersey Energy Security and Affordability Act (the Act) recently was introduced in the State Legislature. This proposed legislation would direct the state's Board of Public Utilities (BPU) to establish 1) an Advanced Nuclear Development Fund (ANDF) through which the state's ratepayers would subsidize the construction of at least 1,200 megawatts (MW) of power from qualifying nuclear generation projects and 2) an Advanced Nuclear Energy Certificate (ANEC) program that would require electric power suppliers and basic generation service (BGS) providers – and, ultimately, ratepayers – to purchase certificates generated by qualified nuclear projects.

How Would the ANDF Program Work?

The ANDF would represent an expansion of the Societal Benefits Charge originally established by the Electric Discount and Energy Competition Act (EDECA). The ANDF would be funded through a non-bypassable charge designated the advanced nuclear development charge (ANDC). The ANDC would be imposed on all electric utility customers. The BPU shall establish both the amount of the ANDC and the overall amount each electric utility must collect.

Money deposited in the ANDF, in turn, would provide funding for 1) a portion of costs incurred for construction of a qualified nuclear generation project and 2) a portion of the project's allowable cost increases determined by the BPU as just and reasonable and subject to a BPU-approved cost sharing structure. The level of funding provided to a qualified advanced nuclear reactor project shall be established by the BPU in any order designating a qualified advanced nuclear reactor project. The total funding amount provided through the ANDC cannot exceed 5 percent of the verified total construction cost estimate approved by the BPU.

How Would the ANEC Program Work?

The proposed ANEC program would rest on the fundamental requirement that a percentage of kilowatt hours (kWh) sold in New Jersey by each electric power supplier and basic generation service (BGS) provider come from nuclear energy. The program must support 1,200 MW of electric generation from qualified nuclear projects, with the percentage of kWh of energy required to come from nuclear energy based on 1) the projected ANEC production of each qualified project, 2) for a period agreed upon by the BPU and qualified project, and 3) beginning from the qualified project's commercial start date.

A qualified nuclear project would receive ANECs for each kWh of electricity generated and sold through competitive wholesale markets in the Pennsylvania-New Jersey-Maryland (PJM) region, but not for power sold to a co-located energy user or via a direct power purchase agreement with an end user. An electric power supplier or a BGS provider (i.e., an electric utility) would comply with the program through the purchase of certificates at a price and for the period required by the BPU. Those power suppliers and BGS providers, in turn, could pass those ANEC costs on to New Jersey consumers.

Designating Qualified Advanced Nuclear Generation Projects

As a preliminary matter, the Act would require the BPU to conduct a feasibility study concerning the deployment of advanced reactors in the state and develop a "comprehensive strategic plan" to ensure development and deployment of advanced nuclear reactors in the state. Together with the New Jersey Department of Environmental Protection, the BPU then would make recommendations to the governor and legislature designed to promote the development and use of nuclear energy.

No more than 270 days after the Act's effective date, the BPU would issue a request for "expressions of interest and information" for the construction of at least one advanced nuclear reactor to generate 1,200 MW of power in the state. "Any entity" could submit an expression of interest within 90 days of the Board's request, subject to minimum requirements set forth in the Act.

Upon receipt of a complete expression of interest, the BPU would perform an evaluation in no more than 270 days to determine whether a proposed project provisionally qualifies as reasonably likely to satisfy the state's energy reliability, resilience and capacity needs at a reasonable cost to ratepayers. The BPU must grant provisional qualification status to at least one proposed project and may grant such status to multiple projects, then negotiate with a project the ANEC price and schedule, any ANDC funding, risk sharing for allowable cost increases, and other terms and conditions deemed necessary by the BPU.

Once the BPU and a qualified project reach agreement on all key terms and conditions, a final BPU order would memorialize the agreement and designate the project as a qualified project. Importantly, that final BPU order would not be subject to change except with the consent of the BPU and qualified project entity.

Will Ratepayers Fund Nuclear Generation?

More than 25 years ago, the Electric Discount and Energy Competition Act (EDECA) unbundled New Jersey's electric utility services and eliminated the construction, ownership and operation of generation facilities from the regulated services provided at ratepayer expense. The Act's proposed funding mechanisms open the door to discussing whether utility ratepayers should now provide financial support for the construction of nuclear generation facilities. This potential policy alternative will clearly be among those considered as the Legislature and other stakeholders debate how best to address the increasing energy costs borne by New Jersey consumers.

For more information on these utility reregulation developments and other New Jersey energy policy matters, please contact the author.

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