The Garden State could soon be rid of its last two coal-fired power plants.
The pair of South Jersey facilities — Logan Generating Plant in Gloucester County and Chambers Cogeneration in Salem County — are planned to be shut down by the end of 2020, according to Jim Gordon, a consultant working with the plants’ parent company, Connecticut-based Starwood Energy Group, on the matter.
Shuttering the coal plants would eliminate two of New Jersey’s largest contributors to global climate change. But Atlantic City Electric, the utility that buys electricity from the plants, argues such a move will leave its customers paying hundreds of millions in excess costs and is not ready to support the plan.
The end of Garden State coal
Starwood and Atlantic City Electric agree that shuttering the coal plants will be a leap toward a cleaner South Jersey environment.
The two plants can generate a combined 481 megawatts of power; 219 megawatts from Logan and 262 megawatts from Chambers. Gordon said that’s enough electricity to serve about 480,000 homes.
Closing the coal plants will halt 3.9 million tons of carbon dioxide emissions from entering the atmosphere between 2021 and 2024, according to a report prepared for Starwood by FTI Consulting that was published last week.
That’s equivalent to taking more than 760,000 cars off the road for one year, the report said. It would be a major step toward New Jersey reducing its greenhouse gas emissions to 80% of 2006 levels — a requirement of the state’s 2007 Global Warming Response Act, and one way the state is trying to mitigate the effects of climate change.
Coal power has long been on the outs in New Jersey, due to a combination of economics and political pressure to address climate change.
Last year, the B.L. England coal plant in Cape May County was permanently shutdown. There is hope that facility will become an interconnection point for power generated by offshore wind to come onshore.
Today, 94% of electricity generated by utility-scale facilities (one megawatt or larger) in the Garden State comes from natural gas and nuclear sources, according to the U.S. Energy Information Administration. Solar and offshore wind are also on the rise, as the state moves to get 50% of its power from clean energy by 2030, and 100% by 2050.
Gordon argues that the Logan and Chambers plants could both be redeveloped into facilities that could serve clean energy, like becoming future battery storage sites, or staging areas for offshore wind development.
Customers on the hook?
Starwood can start efforts to retire the Logan and Chambers plants on its own. But Gordon said the company would like to have the support of Atlantic City Electric — which has payed for electricity from the two coal plants since 1994 — and other stakeholders in the process.
Under Starwood’s retirement plan, electricity from the coal plants would be replaced by power from PJM Interconnection, which is the regional power grid serving New Jersey and a dozen other states, at the same price.
But Atlantic City Electric is not ready to support the plan, according to Frank Tedesco, a utility spokesperson.
“Starwood is solely responsible for shuttering these plants and we will continue to support that effort, but unfortunately Starwood’s proposal would require our customers to unfairly assume unnecessary costs,” Tedesco said. “That is not the right approach and something we cannot support.”
That relationship between Starwood and Atlantic City Electric is memorialized in what’s called a power purchase agreement. The utility has 30-year agreements for both coal plants, meaning it is committed to buying their electricity until 2024.
Gordon said the two agreements generate about $160 million in annual revenue for Starwood; $90 million from the Chambers plant, and $70 million from the Logan plant.
“The ratepayer will pay the same cents per kilowatt charge as they are currently paying under the power purchase agreements, and they will be getting cleaner power,” Gordon said.
Beyond that, Starwood is offering to pay Atlantic City Electric $7.5 million to support the plan.
“If the governor and the (New Jersey Board of Public Utilities) get behind it, and encourage (Atlantic City Electric) to move forward, the rate payers are not going to pay any cost,” Gordon said. “In fact, there’s going to be a payment of $7.5 million to them.”
Atlantic City Electric disputes Gordon’s assessment of the cost to ratepayers, and instead claims that breaking the power purchase agreements early would leave utility customers on the hook for more than $300 million in its it describes as excess costs.
That number comes from the fact that Atlantic City Electric is already paying above market price for the power generated by the two coal plants, Tedesco said. Starwood’s plan would leave the utility paying the same price for power from PJM — something that Gordon described as a benefit.
“Basically, this proposal suggests that these plants would shut down, but Atlantic City Electric customers would continue to pay above-market rates for power,” Tedesco said.
The core issue is that the prices set in the contracts are high, according to Stefanie Brand, the director of the state Division of Rate Counsel, which advocates on behalf of utility customers.
“[Atlantic City Electric] entered into the contract, and at the time I think they set the price as best they could. But they were very long contracts, like 30 years, and as it turned out the prices weren’t set very accurately,” Brand said.
“We’ve actually been paying a lot more than we might’ve had to for these contracts for many years,” she added, referring to utility customers.
So far, nothing formal has happened. PJM has not received any deactivation notice for the two plants, according to spokesperson Susan Buehler. And the New Jersey Board of Public Utilities has not received any applications related to the plants, and the contracts tied to them.
“These plants operate under long-term contract to Atlantic City Electric Co., and any amendment to those contracts would have to come before the Board for review,” the BPU said in a statement. “The Board has not received a petition to amend those contracts.”