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New Jersey appeals ruling against law subsidizing new power plants

By: SCOTT DISAVINO |

New Jersey has appealed a federal district court decision overturning a state law that subsidizes the construction of new natural gas-fired power plants in the state.

The appeal filed on Thursday with the U.S. Court of Appeals for the Third Circuit creates more uncertainty for generators already contending with many changes in the PJM (the former Pennsylvania-New Jersey-Maryland) power grid and across the nation, electricity traders said.

Generators are already dealing with weak power and gas prices, the retirement of dozens of coal power plants due to stricter environmental rules, increased use of gas and renewable-fueled power plants, and little growth in consumer power demand due to continuing weak economic conditions, among other things.

New Jersey said it wanted the new gas plants built to ensure the state’s power grid remains reliable, to reduce electric costs, cut emissions and provide other environmental benefits, and create new construction and other jobs.

Some market analysts, however, say the subsidies could cost New Jersey rate-payers up to $3 billion over the next 15 years.

Pennsylvania power company PPL Corp, New Jersey power company Public Service Enterprise Group Inc and other energy companies with existing power plants in the PJM region participated in the original federal lawsuit against New Jersey.

PJM operates the power grid in parts of 13 U.S. Mid-Atlantic and Midwest states, including New Jersey, and the District of Columbia.

The power companies wanted to block the state’s efforts to subsidize the construction of new plants in part because those plants would compete with their existing facilities.

U.S. District Judge Peter Sheridan said in a decision in October that New Jersey’s power capacity law was unconstitutional because it violates the Supremacy Clause of the U.S. Constitution and infringed on the U.S. Federal Energy Regulatory Commission’s authority to regulate the sale of wholesale power in interstate commerce.

Sheridan heard the case in April and May of 2013.

New Jersey passed its Long Term Capacity Agreement Pilot Program Act in January 2011, which requires the state’s utilities to enter long-term capacity contracts with generators chosen by the New Jersey Board of Public Utilities, the state’s utility regulator.

In March 2011, the board selected three companies to build new gas plants in New Jersey – oil company Hess Corp, power company NRG Energy Inc and independent power producer Competitive Power Ventures (CPV).