This article was originally published by the New Jersey Monitor.

After a scorching summer that saw electricity bills soar, experts told lawmakers Wednesday that they should eschew costly utility mandates, invest in technology like carbon capture, and avoid shutting down power plants before replacement power sources are up and running.

Wednesday’s hearing of the Assembly’s utilities committee was called to address complaints from South Jersey residents about dramatic electric bill spikes, and it came in the midst of New Jersey’s push for broader electrification that could push power demand yet higher.

Jason Stanek, executive director of government services for PJM Interconnection, the grid operator for New Jersey and 12 other states, said New Jersey should not advance policies that shut down power sources unless they have replacements that are operating.

The state’s last two coal-fired power plants closed in 2022, and wind projects meant to boost its generation capacity have faced cost and other hurdles.

“To minimize rate impacts, we would respectfully request avoiding any policies that are designed to push resources off the system before we have an equal and equivalent amount of replacement resources,” Stanek said.

Swings in energy supply and demand can put pressure on rates, especially when supply falls as demand rises.

Stanek noted electricity prices at its annual July capacity auction surged nearly nine times higher than the previous year. Utilities procure electricity through the auction and sell it to ratepayers at cost but can generate a profit from transmission, among other things.

Rate Counsel Brian Lipman said the higher auction prices would add between $12 and $15 to customers’ monthly electricity bills beginning in June.

Improvements to energy efficiency had helped tamp down on demand for more electricity generation in recent decades, though that trend has since reversed, Board of Public Utilities President Christine Guhl-Sadovy told the committee.

Growing electrification, increased uptake in electric vehicles and their charges, and surging demand for data centers spurred by a boom in artificial intelligence are set to push New Jersey’s energy needs up significantly, said Assemblyman Wayne DeAngelo (D-Mercer), the committee’s chairman.

“If you have a quick charging station, they use 100 amps. That’s the amount of power that’s in a small residential house,” said DeAngelo, an electrician by trade. “As we’re moving New Jersey across and increasing our bandwidth and the need for data — be mindful as AI is coming into the picture and becoming more prominent — one data center that they’re talking about building is going to need 800 (megawatts).”

That data center alone would consume nearly a quarter of the electricity produced by three nuclear power plants in South Jersey that, according to the U.S. Energy Information Administration, accounted for 43.5% of the state’s energy generation in 2022. Combined, the plants produce 3,457 megawatts of electricity.

Some suggested New Jersey’s ambitious renewable energy goals, which call for the state to draw 100% of its power from renewable sources by 2035, wouldn’t help the state meet electricity demand in the short run.

“We need to be moving towards that clean energy future, but we also need to be investing in some of the technologies of where we are today. There are technologies that can help out the use of natural gas, like carbon capture,” said Rich Henning, president and CEO of the New Jersey Utility Association.

Others suggested regulatory changes would push power prices down.

Lipman, the rate counsel, said changes to federal rules that would include more electric capacity in PJM auctions would push down rates, and he urged an end to legislative mandates that forced utilities to invest in infrastructure or raise other costs passed along to ratepayers, like a $300 million annual subsidy to the state’s nuclear plants that is due to lapse on June 1.

In New Jersey, most utilities can earn 9.6 cents for every dollar invested in addition to recouping their expenses. Those costs are typically borne by ratepayers.

“We’re forcing them to invest, and they’re not doing that for free. They’re coming back and they’re seeking their money,” Lipman said, adding new oversight of transmission could also control costs.

Grid capacity, data centers among topics at New Jersey hearing on electricity prices is an article from Energy News Network, a nonprofit news service covering the clean energy transition. If you would like to support us please make a donation.

The pair of 1950s-era coal plants bailed out under Ohio’s House Bill 6 law are likely to remain unprofitable even after a surge in grid operator payments to generators, experts say. 

The PJM Interconnection grid market makes capacity payments to line up power to meet expected demand in the years ahead. Aging, uneconomical coal plants are being retired at a time when data centers and manufacturers are starting to use more electricity, causing future power generation prices to rise.

But even record-high prices in PJM Interconnection’s recent capacity auction won’t cover the hundreds of millions of dollars in subsidies paid by ratepayers to cover Ohio utilities’ costs for the Ohio Valley Electric Corporation’s Kyger Creek and Clifty Creek power plants.

“Even with a super high price, OVEC is still going to be in the red,” said Neil Waggoner, Midwest manager for the Sierra Club’s Beyond Coal campaign.

The ratepayer subsidies are a result of HB 6, the 2019 state law at the heart of the largest corruption scheme in Ohio’s history. Republican legislative leaders have blocked all efforts to repeal the coal subsidies from coming to a floor vote.

This year alone, ratepayers are on track to pay nearly $200 million to prop up the two plants, one of which is in Indiana. By 2030, total ratepayer costs from the bailout could exceed $1 billion, according to RunnerStone, a consultant for the Ohio Manufacturers’ Association.

Starting next summer, the payments for generators to be ready to supply electricity when PJM Interconnection needs it will jump to about nine times the current rate for most of the grid operator’s service region. 

“Put simply, the market pays participants for the promise to produce electricity when called upon by PJM,” said Daniel Lockwood, a spokesperson for the regional grid operator. An auction sets the levels for each year’s capacity payments, and the payments go to generators that bid the clearing price or less.

A spokesperson for the power plants did not directly answer the Energy News Network’s question about whether both cleared the latest PJM auction, although he described the auction results as “positive.”

“The auction results were a positive development for the OVEC plants and are more broadly a signal to the market that additional generation resources are needed in the PJM region,” said Scott Blake, a spokesperson for American Electric Power and Ohio Valley Electric Corp. While the HB 6 rider charges depend on multiple factors, the impact of the 2025/2026 capacity pricing “is expected to be positive for customers,” he said.

AEP is OVEC’s largest shareholder, along with other utility companies in Ohio and other states.

HB 6’s OVEC subsidies currently require Ohio’s residential utility customers to pay between $1.30 and $1.50 per month, depending on whether their utility is owned by AEP, AES Ohio, Duke Energy or FirstEnergy, according to PUCO data from spokesperson Brittany Waugaman. Businesses pay for the rider, too. The HB 6 rider’s net total costs last year were more than $148 million.

Doing the math

While capacity payments will reduce the OVEC plants’ total costs to Ohio ratepayers, the revenue won’t, in itself, make the plants profitable.

Expert testimony from a Michigan case last year found the OVEC plants would need capacity payments averaging about $418/MW-day for several years to become economical. Last month’s record-high price that will take effect next summer was about $270/MW-day.

Economic analyst Devi Glick of Synapse Energy Economics testified in the case on behalf of the Sierra Club.

“To massively oversimplify the economics of the OVEC plants, there are two categories of costs and two categories of revenues,” Glick told Energy News Network. “Costs are on one side of the equation and revenues on the other.”

Based on then-current projections for costs and energy market revenue, Glick calculated what the plants’ capacity revenues would have to be for the equation to balance out.

Several caveats would apply, Waggoner acknowledged, including any differences from last year to this year that could affect projected energy revenues. Nonetheless, he noted, a significant gap would remain.

Glick’s estimate of about $418 as a break-even capacity price for the OVEC plants is realistic and may even be conservative now, said John Seryak, managing partner for RunnerStone.

“PJM is no longer paying for a coal plant’s full power capacity anymore under new rules it created just prior to this capacity auction,” Seryak explained. “That could mean that OVEC needs even higher-priced capacity and energy to be profitable.”

“Future energy market prices, OVEC’s future coal costs, and OVEC’s environmental compliance costs will also be important factors determining the extent of its losses or profitability,” Seryak continued. “All that said, we do not anticipate OVEC operating at a profit without further price increases.”

Meeting energy demand

Blake emphasized the OVEC plants’ role as a “reliable generation resource for our customers and for our region,” adding that the HB 6 rider “ensures that customers in Ohio receive electricity from OVEC for what it costs to produce it and the funds are used to pay down debt with no proceeds going to shareholders.”

That’s not exactly correct, said attorney Kimberly Bojko at Carpenter Lipps, who represents the Ohio Manufacturers’ Association in cases at the Public Utilities Commission of Ohio. “Customers pay the cost to operate and run OVEC and the power produced from OVEC is then sold into the wholesale electric market,” she said. Any revenue offsets the costs of HB 6’s coal subsidy.

The Ohio Manufacturers’ Association also has disputed the use of the HB 6 rider to pay down the OVEC plants’ debt in cases before the PUCO.

“By using ratepayer funds to pay down its debt, AEP Ohio is essentially shifting its bad debt to the Ohio ratepayers,” Seryak said. “It’s akin to if a person forced their neighbor to pay for their mortgage payment.”

“Customers pay for more than just OVEC’s debt, though,” Seryak added. “Customers also pay for losses in the energy market OVEC incurs. When this occurs, it means the electric grid does not need OVEC for reliability. Instead, OVEC is burning coal pointlessly at a loss and charging it to Ohio’s ratepayers.”

Ohio coal plant subsidies still a bad deal for ratepayers despite growing generation demand, experts say is an article from Energy News Network, a nonprofit news service covering the clean energy transition. If you would like to support us please make a donation.