In wake of key auction, BPU chief says more work to be done

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The head of the Board of Public Utilities says there’s still work to be done to improve the regional power market, even after a successful auction that will result in three new power plants in the state.

The head of the Board of Public Utilities says there’s still work to be done to improve the regional power market, even after a successful auction that will result in three new power plants in the state.

“The BPU will continue to seek improvements in the PJM market to deliver new capacity where it’s needed most,” said BPU President Robert M. Hanna, in a statement released Monday evening. PJM refers to the 13-state regional power grid New Jersey belongs to, which is operated by PJM Interconnection Inc.

“The BPU will also continue to work with the industry because New Jersey requires new and more affordable generation to improve reliability issues; reduce energy prices; and replace aging, dirty and inefficient generation facilities,” he said.

The statement was Hanna’s first public comment since the results of the regional capacity auction — known as the base residual auction — were announced Friday. The auction is important because it determines the price ratepayers will pay for electricity generation capacity beginning in 2015. It’s also the first test of viability for new power plants, because plants can only provide generation capacity if they clear the auction.

The auction took center stage in New Jersey because Gov. Chris Christie last year signed into law the Long-Term Capacity Agreement pilot program, or LCAPP, which created a potential subsidy to generators that agreed to build new plants in New Jersey. The governor believes more in-state power plants will help lower electricity rates and create jobs in the state. The administration argued that the existing market structure wasn’t doing a good enough job of sparking new power plant construction.

The goal of the legislation was to create 2,000 megawatts of new generation capacity by offering price guarantees to companies that agreed to build new plants. Last spring, the BPU approved three natural gas-fueled power plants for the potential subsidy, but the plan was put on life support after federal regulators approved rule changes that made it more difficult for the new plants to succeed in this month’s auction.

The subsidy program is also the subject of a federal lawsuit, which has yet to be resolved.

Despite those hurdles, two of the three LCAPP plants — Hess Corp.‘s plan in Newark and Competitive Power Ventures‘ Woodbridge plant — cleared in the auction, meaning they will receive payments for providing capacity. A third plant, LS Power‘s West Deptford facility, also succeeded at auction, even though it is not part of the subsidy program.

Still, Hanna said, the BPU’s “work is not done.” He didn’t go into specifics about what initiatives the agency might undertake next, but in a report filed in December, BPU staff recommends a number of steps, including a re-examination of the grid-interconnection process.