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March 15, 2017 in New Jersey by

ZEC Legislation Comes to New Jersey

These days, it seems, a zero can also be a hero. A zero-carbon emissions facility, that is, and a nuclear power plant, to be exact. Whether that will still be true at the end of 2017, however, is uncertain.

On February 28, 2017, Senator Bob Smith, Chairman of New Jersey’s Senate Energy and Environment Committee, introduced a wide-ranging package of legislation, which included a directive to the New Jersey Board of Public Utilities (BPU) to study the value of instituting a “Zero Emissions Credit” (“ZEC”) system in the state. The system is based on a program created by the New York Public Service Commission (“PSC”) in response to the announcement of the closure of New York’s financially ailing upstate nuclear power plants that will require all load serving entities, whether utilities or third-party energy suppliers, to purchase a certain amount of ZECs, or pay a fine, beginning in April 2017. The amount of ZECs each individual entity must purchase is based on a) the total number of ZECs (estimated at 27,618,000MWh) and b) its proportional use as compared to the statement load. Regulators and power producers in other states have taken note of New York’s program, with similar bills being introduced in several other states.

While the particulars of the bill is still ‘under construction’, Chairman Bob Smith outlined several other initiatives of the package, including a proposed constitutional amendment to prevent the diversion of clean energy funds for other purposes; providing financial credits for homeowners to install so-called ‘smart thermostats’; examining the potential for incorporating energy storage and distributed generation within the current energy infrastructure; and financing for the installation of electric car-charging stations.

All of the proposals are likely to face certain headwinds, but the fate of Zero Emission Credits initiatives may be determined by the outcome of its New York counterpart, which, although slated to take effect in late April 2017, has been beset by legal struggles.

In October 2016, a coalition of power producers (including Dynegy and NRG) filed a lawsuit in the Southern District of New York against the PSC, alleging that the ZEC program impermissibly intrudes on FERC’s jurisdiction over the sale of wholesale electric energy. The lawsuit also points out that ratepayers will be the ones subsidizing the aging nuclear power plants, instead of replacing them with alternative renewable energy sources. Oral arguments are slated for March 29, 2017, with a decision expected shortly thereafter.

And, more recently, on March 6, 2017, New York State Assembly heard testimony from several groups on concerns with the program, with several raising the issue of the program potentially placing an unfair burden on ratepayers while providing subsidies to large corporations. On the other hand, ZEC supporters say that it closing the plants will lead to the loss of important jobs and tax revenue in struggling upstate communities, and prevent New York from achieving its goal of reducing carbon emissions 80% from 1990 levels by 2040.

With the short-term outlook of nuclear power uncertain, one thing is clear: New Jersey regulators are wasting no time in planning for a post-Christie future, which will, if Chairman Smith has anything to say about, include a dramatic reshaping of New Jersey’s energy policies.