Energy Deregulation for the state of New Jersey
New Jersey has some of the most expensive electricity prices in the United States. The state typically receives more than half of its electricity from nuclear power, while natural gas meets almost a third of the state’s demand. Although the state has significant wind energy potential, wind makes a negligible contribution to New Jersey’s electricity supply.
New Jersey has three nuclear power plants. One of those, the Oyster Creek Nuclear Generating Station, first came online in 1969 and is the oldest operating nuclear power plant in the United States. New Jersey has no fossil fuel reserves, so its natural gas arrives through pipelines from Pennsylvania, while coal is shipped to the state from West Virginia, Pennsylvania, and Virginia.
Regulatory Impediments to Affordable Energy Although affordable energy is a vital component of a healthy economy, regulations frequently increase energy costs. Regulations imposed in the name of reducing carbon dioxide and greenhouse gas emissions are especially costly. Carbon dioxide is a natural byproduct of the combustion of all carbon-containing fuels, such as natural gas, petroleum, coal, wood, and other organic materials. Today, there is no cost-effective way to capture the carbon dioxide output of the combustion of these fuels, so any regulations that limit carbon dioxide emissions will either limit the use of natural gas, petroleum, and coal, or dramatically increase their prices.
Below are some facts about New Jersey’s regulatory environment that are likely to affect the cost of energy or the cost of using energy. New Jersey has enacted several policies that increase the cost of energy. Electricity prices in New Jersey are among the highest in the country, owing in part to some of its regulations.
New Jersey caps greenhouse gas emissions. The Global Warming Response Act, passed in 2007, instituted mandatory caps on greenhouse gas emissions.1 The law limits emissions to 1990 levels by 2020 and 80 percent less than 2006 levels by 2050. It also requires the creation of a monitoring and reporting system for electric and gas utilities’ emissions. As member of the Regional Greenhouse Gas Initiative, New Jersey has also imposed a cap on greenhouse gas emissions from power plants. New Jersey is a member of the Regional Greenhouse Gas Initiative (RGGI), a regional agreement among ten Northeast states to limit greenhouse gas emissions. This agreement requires states to cap carbon dioxide emissions from the electrical generation sector and to reduce those emissions by 10 percent by 2018 through a cap-and-trade scheme. • New Jersey requires utilities to sell a certain percentage of electricity from renewable sources. The state’s renewable portfolio standard requires utilities to provide 22.5 percent of electricity sales from renewables by 2021. In addition, the standard also contains a separate solar specific provision which requires the procurement of at least 2,518 gigawatt-hours (GWh) from in-state solar electric generators during energy year 2021 (June 2020 to May 2021), and 5,316 GWh during energy year 2026 and each year thereafter.2 • New Jersey requires the use of reformulated motor gasoline blended with ethanol.3 • New Jersey imposes automobile fuel economy standards similar to California’s, which include attempts to regulate greenhouse gas emissions. Senate Bill 2351, passed in 2004, adopted California’s vehicle emission standards.4 • New Jersey requires new residential and commercial buildings to meet energy efficiency standards. Residential buildings must meet the 2006 International Energy Conservation Code (IECC) (with state amendments) while commercial buildings must meet ASHRAE 90.1-2004.5 The IECC (developed by the International Code Council) and ASHRAE 90.1 (developed by the American Society of Heating and Refrigeration and Air
Conditioning Engineers) are model codes that mandate certain energy efficiency standards. Senate Bill 2146, enacted in 2008, requires that new buildings larger than 15,000 square feet and built solely for state use must meet the silver LEED standard or an equivalent standard.6 The silver LEED standard is one level of the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) rating system. In 2002, Governor James McGreevey issued Executive Order 24, requiring all new state school designs to use LEED guidelines, though new schools do not have to gain LEED certification.7 • New Jersey imposes state-based appliance efficiency standards, but the state’s standards were preempted by federal regulation.8 State agencies are required to purchase Energy Star products, when available.9 • New Jersey does not allow electric utilities to “decouple” revenue from the sale of electricity, but does allow natural gas utilities to decouple. Some states decouple revenue from actual sales, allowing utilities to increase their revenue by selling less electricity and natural gas.