January 31, 2011 / 9:58 PM / 8 years ago

NJ Gov. signs bill to get more power plants built

* Law to build up to 2,000 MW of new generation

* Critics say law is a billion dollar giveaway

NEW YORK, Jan 31 (Reuters) - New Jersey Governor Chris Christie on Friday signed a bill into law to promote the construction of new power plants and make electricity more affordable in a state with some of the highest costs for power in the nation.

A spokeswoman for the governor said Monday that the governor’s office would later in the day issue a statement on the new law, which establishes a long-term capacity agreement pilot program, from Senate Bill 2381/Assembly Bill 3442.

The new law is an effort by the state to encourage the construction of up to 2,000 megawatts of new generation to create jobs and reduce energy costs by offering power plant builders long-term, ratepayer subsidized energy contracts.

A couple of potential beneficiaries of the new law include private power developers Competitive Power Ventures, of Silver Springs, Maryland, and LS Power Group, of New York City, which have each developed plans to build new plants in New Jersey.

A spokesman at Competitive Power Ventures recently told Reuters that there was no appetite in the market to finance new generation without a long-term contract and that the bill could provide the incentive needed to get these plants built.

Power costs in New Jersey are among the highest in the nation. The sponsors of the bill said New Jersey ratepayers pay up to $1.9 billion a year to cover regional power grid operator PJM’s capacity costs and congestion charges needed to import power from other states. [ID:nN23132225]

PJM operates the power grid and energy market serving 51 million people in all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia.

PJM uses the capacity market to help keep the grid reliable. Generating companies receive capacity payments to keep their plants available now and in the future.

But, the bill’s sponsors pointed out that those capacity payments, which total about $1 billion a year, have also kept some local peaking plants online to run for just a few days a year.


The bills critics include an odd mix, including the Sierra Club environmental group and Public Service Enterprise Group Inc (PEG.N), the state’s biggest power company.

In a release Monday, the Sierra Club said the new law was a handout to special interest groups and a $2 billion energy tax on the residents of New Jersey.

The Sierra Club weighed in because the new law would subsidize a few natural gas-fired power plants with 10-year contracts, while giving no long-term contracts for wind and solar projects.

Earlier this month, PSEG, which owns several power plants in New Jersey that receive those PJM capacity payments, argued the bill was an energy tax that would cost ratepayers more than $1 billion a year. [ID:nN07193332]

Both PSEG and the Sierra Club noted New Jersey tried subsidizing the construction of new generation in the 1970s with devastating financial results.

PSEG said consumers still had to pay more than $1 billion for the remaining costs of those long-term contracts over the next six years.

PSEG also noted that it and other generating companies have invested billions in the state on new generation and upgrades of existing plants, environmental retrofits and efficiency programs, and this bill would put those investor-financed projects at risk.

PSEG warned that supporters of the bill want to create jobs but could actually cause jobs loses at existing energy facilities. (Reporting by Scott DiSavino; Editing by Alden Bentley))

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