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Opinion: Power Plant Subsidies Will Cost Taxpayers Millions

Gov. Chris Christie says he's for lower taxes, but his plan to subsidize natural gas plants is an energy tax on NJ consumers, says the head of NJ Sierra Club.


While it is hard for the public notice, Governor Christie just raided your wallet.  He just hit us with an energy tax that will increase our energy bills dramatically. Hundreds of millions of ratepayer dollars will be going to subsidize two new natural gas plants in and Newark’s Ironbound section.  Legislation passed last year established the subsidies and return guarantees for three new gas plants, but only two have cleared auction by the regional grid operator and have been approved by the Board of Public Utilities. 

This is a dirty deal for rate payers as the price of natural gas is now at its lowest level in 30 years, dropping by 50 percent in last two years.  Currently New Jerseyans pay between 11-12 cents a kilowatt for electricity and natural gas electricity sells for 4.5 cents a kilowatt wholesale.  These power companies will be able to enter 15 year contracts charging 22-42 cents a kilowatt, making outrageous profits at the expense of New Jersey ratepayers.  

The Newark 625-megawatt plant, operated by Hess, will receive a guarantee of sales and subsidies of about $56 million a year, or 22 cents a kilowatt.  They are receiving at least $40 million in direct subsidies. 

The proposed by Competitive Power Venture (CPV) will receive even higher guaranteed sales and subsidies, about $68-95 million a year. 

CPV plant would generate $11 million in profits its first year in operation if it charged the wholesale price of gas (4.5/kilowatt), but they are charging 28 cents, guaranteeing a $68 million profit.  That is a $57 million subsidy in the first year. Their profit margin will be over six-times the market cost of gas-fired electricity.  The can earn up to $75 million a year over the fifteen year contract. 

Over the 15 year contracts this will total over $1.2 billion for CPV and up to $400 million for the Hess plant. 

This is the Great Gas Ripoff.  Under this plan New Jersey ratepayers will be paying double or triple the cost of gas. 

The subsidies come from legislation establishing the Long-Term Capacity Agreement Pilot Program (LCAPP) passed last year.  The program allows these plants to enter into 15 year contracts, despite the plummeting price of natural gas. 

They are guaranteed automatic sales and a massive return, even if that power is not used or it is shipped to New York City.  The plants will not have pay the Societal Benefits Charge on gas they buy, another tax break. These plants are receiving corporate welfare. 

The business community that complains about high energy costs should be up in arms over this increased cost. These subsidies will actually increase rates for New Jersey consumers while driving down rates in adjoining states, hurting New Jersey competiveness in trying to bring in new businesses. 

The Governor is subsidizing gas plants while claiming that the prices for solar and wind are too high.  Yet he is giving bigger subsidies to fossil fuels while robbing clean energy funding that creates more jobs and is better for the environment.  This is the ultimate hypocrisy.

These subsidies are higher than the cost of solar.  A kilowatt hour of solar currently costs 16 cents to produce and sells for 21 cents and prices are continuing to drop. With solar the money stays in New Jersey and we are not subsidizing fracking and air pollution.   

These plants will cost more than solar energy without any of the environmental or green job benefits.  The Christie administration is subsidizing air pollution and dirty fossil fuels while gutting our clean energy programs and diverting clean energy funds to close budget gaps.

With the Hess plant we are subsiding more pollution in the Ironbound section of Newark.  This community already has a disproportionate share of air pollution; it is one of the most heavily polluted communities in the United States.   This plant will add up to 1000 tons more air pollution a day.  We will be subsidizing this plant which will directly impact people’s health, especially those with asthma and respiratory diseases. 

The natural gas used at these facilities will come from gas drilling operations using fracking in Pennsylvania and other states.  Fracking cause serious air pollution and has been linked to groundwater contamination.  New Jersey ratepayers will be subsidizing this pollution and the increasing pipeline infrastructure being installed across our open spaces and important water supply watersheds to carry the fracked gas from Pennsylvania to New Jersey. 

Both the regional grid operator PJM and the Federal Energy Regulatory Commission (FERC) have stated that these subsidies violate the fair competition clause of the National Energy Policy Act.  A third plant was approved in the auction, the 738-megawatt LS Power plant in West Deptford.  LS Power announced back in November that they are moving forward with the plant with private funding, after they did not qualify for LCAPP.  This shows that the subsidies are not only unnecessary, but a major rip-off for ratepayers. 

We are supposed to have energy deregulation with competition lowering prices. Instead Governor Christie is guaranteeing our electric bills are going up and that we will be paying through the nose to subsidize these fossil fuel plants. 

The governor is being fossil fuelish with the ratepayer money of New Jersey residents at the expense of clean air and green jobs.

Jeff Tittel is the Director of the New Jersey Sierra Club.

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