Part 1 of coverage to address potential misconceptions about rising energy prices and how our energy infrastructure issues will challenge the state’s economic future. Read part 2 here.
When Jack Ciattarelli and Mikie Sherrill hold their first gubernatorial debate Sunday night, you can be sure that they will talk about rising energy prices and how our energy infrastructure issues will challenge the state’s economic future.
You also can be sure that they will assign blame — to utility companies, the regional grid operator (PJM) or both. And count on some tough talk about holding groups “accountable,” too.
Placing blame is easy. Being honest about the situation is hard.
BINJE, after talking to numerous industry officials — and moderating a conference on the subject — offers this straightforward look at the issue in a modified question-and-answer format that attempts to accurately address potential misconceptions.
BINJE: A recent FDU poll asked who should be blamed for the recent rise in utility costs. It found residents blamed utility companies the most (26%), followed by the governor (19%) and then energy producers (10%). And when your residential and business bill goes up by 20%, it’s easy to reach that conclusion. But is it fair?
A: No. Utility companies send out the bills — but they don’t profit from them in the way that you might think. Joe Accardo, an SVP at PSEG for state regulatory affairs and centralized services, explained the bill this way.
“The best way to think about the bill is it’s divided into two parts: It’s supply and delivery,” he told the audience at the recent thought-leaders event.
When it comes supply, PSEG essentially is a bill collector for energy producers. This is the part of the bill that is going up (due to increased demand and not enough supply). It’s also the part of the bill in which the utilities do not see a cent of the increase.
Teresa Reed of JCP&L agreed, telling the audience that 68% of a JCP&L bill is for supply and other pass-through costs.
“Only 32 cents of what we collect manages the grid and transmission,” she said. “We’re not making gobs of money running transmission and distribution.”
BINJE: So, it must be PJM, the regional grid operator which works to not only ensure energy is spread out through the 14 areas it covers (13 states plus D.C.) but also to bring new energy sources online to ensure more is available. PJM has been blamed for not bringing new sources on quickly enough — is that fair?
A: Asim Haque doesn’t think so. To be clear, that’s not surprising, Haque is an SVP at PJM. And full credit to Haque for being willing to come to a conference where his organization would be blamed. He offered his take.
For starters, N.J. has a supply shortage, he said. Hague said peak demand is 19,000 megawatts, but N.J. only has a generating capacity of about 13,000 megawatts.
Haque said PJM has already approved projects that could bring 1,700 additional megawatts — and has projects waiting for approval that could bring that total to 3,000.
“So, even if all of those projects were to ultimately come to fruition and construct you are still short,” Haque said.
And that’s assuming all of these projects will be built, which is not likely.
“The game plan was, ‘We’re going to reduce our fossil fuel output, and we are going to have 11,500 megawatts of offshore wind make up the balance,’” he told the audience. “Unfortunately, that offshore wind has not come to fruition.”
BINJE: Depending on who you talk to, offshore wind is dead — or on hold. And depending on who you talk to (especially Republicans), the state’s seemingly all-in-one-basket approach to offshore wind is the cause of these price increase. Is that fair?
A: Not exactly, industry officials told BINJE that while the state may have put too much hope in offshore wind, there was never a belief that offshore wind would be here this year. In other words, even if the industry wasn’t impacted by the pandemic and the supply-chain issues that came from it (in addition to Republican administrations not offering support), it would not solve the current problem. (It would have produced potentially thousands of jobs.)
BINJE: So, what happened? We knew this supply problem was coming. Why didn’t we act sooner?
A: Industry officials told BINJE that energy was so cheap (and so stable) for so long, that it was easy to take your eye off the ball. After all, the last big jump in prices could be traced to the 70s, when AC became all the rage (and no one was complaining about that). In the decades since, we got used to having bigger houses but not seeing bigger energy bills.
BPU Commissioner Zenon Christodoulou wasn’t looking to place blame, but his keynote address at the conference showed how other nations have better prepared for an energy supply crisis that is being driving, to some extent, by an explosion of data centers to handle AI needs.
He preached an all-of-the-above approach moving forward – one that will rely on the private sector to find solutions.
“Many new sources of energy are being developed, along with nuclear technologies, both fission and fusion, that are more and more promising every month,” he said. “Nothing is going to be cheap, and nothing is going to happen by tomorrow, but we’ve got to get started.”
BINJE: That’s fine. And it brings us back to our opening. Energy issues will be squarely on the plate of the next governor, but … Jersey being Jersey … we still need a villain in all of this.
A: Found one: Out-of-state energy producers.
They supply energy to the grid — and they have been bringing in record profits in recent years. That’s what happens when you have the limited supply of something that is in great demand.
Not surprisingly, they are not necessarily rushing to correct a problem they are financially benefiting from.
Hard to blame them for that.
