BPU holding hearing on generation capacity

The state of New Jersey’s power generation capacity and its cost competitiveness will take center stage Friday as the Board of Public Utilities hears new testimony on generation capacity procurement and transmission planning during a “legislative-style” hearing in Trenton.

The state of New Jersey’s power generation capacity and its cost competitiveness will take center stage Friday as the Board of Public Utilities hears new testimony on generation capacity procurement and transmission planning during a “legislative-style” hearing in Trenton.

The meeting is a follow-up to a June hearing on the same topic. Officials want to know whether there are barriers to the construction of new power plants in the state, and whether the current market system designed to signal new plant construction is working.

The board initially planned to issue a recommendation on those topics Sept. 9. Instead, agency President Lee A. Solomon issued an order last month calling for a second hearing because he said the matters require more exploration.

“There’s still a lot more discovery that we need on obstacles, or what’s preventing in-state generation from being built,” spokesman Greg Reinert said.

The idea that New Jersey is losing out on new generation isn’t a universally agreed-upon premise.

“I actually don’t agree with that premise,” said Sue Tierney, an energy consultant with the Boston-based Analysis Group. Tierney works with the Compete Coalition, a group of power providers, businesses and other stakeholders that support strong energy markets.

“I actually thing things are working very well in New Jersey,” she said. “There are power plants that have been built under the current arrangement, and there are power plants that have been proposed or are under construction in the state.”

Tierney conceded that New Jersey has high electricity rates, but she said that’s the result of a number of factors — such as distance from fuel sources — and not simply a product of the number of power plants the state has.

Beyond that, Tierney said, electricity rates don’t tell the whole story. While New Jersey has the sixth-highest electricity rates in the country, the state scores better when it comes to average electricity bills. That’s because the Garden State has been successful at implementing energy efficiency programs and other cost-saving measures, such as a demand response program whereby volunteer ratepayers — typically commercial customers — agree to lower their energy use during peak demand times in exchange for a payment from the state’s utilities.

Seeking more power

Solomon, however, has made clear he believes the state does need more in-state power generation, in part because he said it would lower electricity rates and help improve the state’s business climate.

In January, Gov. Chris Christie signed a bill creating a Long-Term Capacity Agreement pilot program to subsidize the construction of up to 2,000 megawatts of new generation capacity in the state. The BPU selected three companies to participate in the program in March, but the regional power grid operator, utilities and other stakeholders challenged the program before the Federal Energy Regulatory Commission, charging that it would disrupt the markets that govern capacity in the region.

In April, FERC issued a ruling that severely restricted LCAPP, though the agency later agreed to re-hear the case.

At a July technical conference, Solomon criticized the ruling, telling FERC it inhibited the state’s ability to spur new generation to meet its growing electricity requirements.

“We are frustrated that FERC has taken action to crush the laudable results of a competitive solicitation that would have yielded nearly 2,000 megawatts of electricity from state-of-the-art combined-cycle plants,” he said.

Reinert said it’s not yet known whether there will be further hearings, or when the BPU might issue its recommendations.

“It depends on where the process takes us,” he said.

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