A coalition of electrical power interests is encouraging New Jersey Gov. Christopher J. Christie to veto a controversial bill that would subsidize development of a Gloucester County power plant that they say would unsettle the region's energy markets.
The bill's sponsors said the legislation approved Tuesday by the New Jersey Legislature will lower energy rates. But opponents, including power generators such as Exelon Corp. and large industrial consumers, call it an anticompetitive sweetheart deal that will cost consumers in the long run.
"We cannot afford an energy surcharge to guarantee billions of dollars of revenue to a few select developers," said George M. Waidelich, vice president of energy operations for Safeway Inc., which says it now spends about $2 million a year on electricity for its five Genuardi's stores in South Jersey.
The measure would provide a guaranteed long-term income for developers of several large power plants. The legislation was known as the "LS Power Bill" because its initial aim was to provide guarantees for LS Power Development L.L.C. to build a giant natural gas power plant in West Deptford, the hometown of state Senate President Stephen Sweeney (D., Gloucester).
Tom Hoatson, director of regulatory affairs for LS Power, said the guarantees are necessary to obtain financing to construct the 640-megawatt plant along the Delaware River, which would cost from $800 million to $1 billion.
Hoatson said the bill would provide the New Brunswick company "an opportunity to compete with other generators." The plant would employ up to 500 people to build, and about 25 people to operate.
Christie spokesman Michael Drewniak said the bill is under review. Legislative sources said the governor is expected to sign it because his office was consulted in drafting amendments that addressed some of the administration's concerns.
In the arcane world of wholesale electrical markets, the New Jersey bill has attracted intense attention because its opponents say it would turn back the clock on years of efforts to open electrical power markets to more competition.
But supporters of the legislation say those markets, which are managed by regional power grid operator PJM Interconnection Inc., have failed to lower prices for New Jersey residents.
And they say that many of the interests opposed to the New Jersey legislation are incumbent power generators like Exelon Corp. and Public Service Enterprise Group of Newark, which stand to gain by keeping new power generators out of the market.
"I don't think it's a system that encourages building new generation to keep prices down," said Stefanie Brand, the New Jersey Rate Counsel, the state's consumer advocate.
"The market is not a true free market," she said. "It's a constructed market that was created by PJM, and as far as we're concerned, it doesn't work."
New Jersey officials complain the Garden State has suffered more than its western neighbors because it pays up to $1.9 billion a year in extra capacity and congestion charges that PJM imposes on power transmitted into the state.
Lee A. Solomon, a Christie appointee who is president of the N.J. Board of Public Utilities, told PJM in December that "it is incumbent upon New Jersey to promote new generation in locations where it is needed the most to ensure reliability and to control costs."
Sen. Sweeney, whose West Deptford hometown would host the LS plant, introduced the legislation that would allow the BPU to sign long-term contracts with several power generators to provide up to 2,000 megawatts of electricity at guaranteed rates. If market rates fall below the threshold, New Jersey ratepayers would pick up the tab.
"Consumers have been playing inflated capacity charges," said Derek Roseman, Sweeney's spokesman. "This is a chance to reverse that. How can that not be a good thing for consumers?"
The Compete Coalition, a Washington lobbying group that promotes open electrical markets, has appealed to Christie's antitax sentiments by branding the bill the "Energy Tax of 2011."
John E. Shelk, president of the Electric Power Supply Association, testified in December that the bill would "artificially depress" rates in the short-term, but would discourage other generators from investing in the future.
Shelk said the bill likely would be challenged because it interferes with federally-sanction wholesale power markets.
Public Service Enterprise Group, the politically powerful Newark energy company that operates the PSE&G utility, announced its opposition to the measure last week.
Anne Hoskins, the company's senior vice president for public affairs, said the state's intervention in the past requiring utilities to enter into long-term supply contracts had "disastrous results."
In the next six years, PSE&G will pay $1 billion for the remaining costs of the long-term contracts, she said. And Atlantic City Electric recently received approval to raise its customers' bills by 5 percent to recover the costs of its out-of-market contracts.
"Subsidies are a slippery slope and will drive away other nonsubsidized private investment in New Jersey," she said.