The Pendulum is Swinging on Energy and Environmental Policy

However, it’s still too soon to know how all new proposals will affect businesses.

By Colleen O’Dea, Contributing Writer On Apr 16, 2018

The changing of the guard in Trenton, coupled with changes by the federal government, are likely to impact New Jersey businesses soon. But the full ramifications of all the new environmental and energy policies are mostly unknown, as the consequences of many remain unclear.

For instance, New Jersey has already taken some actions to strengthen environmental rules and boost clean energy options and is expected to continue to get tougher in these areas. At the same time, the Trump administration is taking the opposite approach and has proposed massive cuts to the Environmental Protection Agency’s budget, which could hamper the state’s ability to enforce its laws.

Some policies of the new Murphy administration in Trenton – including New Jersey’s re-entry into the Regional Greenhouse Gas Initiative or RGGI and an executive order mandating greater use of offshore wind energy – are still too new to know the full impact. And as of press time, a bill to provide subsidies for nuclear energy to PSEG was still working its way through the Legislature, so all of its ramifications are also unknown.

Businesses may get a reduction in the rates they pay for gas, electricity, water and sewerage, depending on whether or not the state’s Board of Public Utilities (BPU) has jurisdiction over the utility (private regulated utility versus public utility). The state BPU’s goal is to ensure that utilities do not get a windfall from federal tax revisions that lowered the corporate tax rate from a maximum 35 percent to 21 percent. The BPU ordered larger utilities, those with annual revenues of more than $4.5 million, to revise their rates to reflect the lower tax burden effective April 2. The utilities, including Public Service Electric and Gas (PSE&G), Jersey Central Power and Light (JCP&L), Elizabethtown Gas, Atlantic City Electric (ACE), NJ American Water and others, have to submit financial and other documents to the BPU to support new rates based on the lower federal taxes they will pay, and these rates are to take effect following the board’s review process as of July 1. They also have to submit a plan to refund money already collected under the old tax rate.

That does not mean rates will drop 14 percentage points, as the federal tax is just a portion of a utility’s rate calculation. But rates should drop somewhat in most cases.

This may be the only change destined to cut utility rates for businesses. Several other recently unveiled policies, as well as one measure that was still working its way through the Legislature at press time, could wind up increasing costs.

Wind Energy

For instance, Murphy has ordered the BPU to write regulations designed to bring wind power off the Jersey coast, with one of the major questions to be answered being: How to pay for subsidies of $1 billion or more expected to be necessary to generate 3,500 megawatts of energy generation by 2030.

On Feb. 28, the BPU approved an order to begin moving toward 1,100 megawatts of offshore wind capacity. That’s the agency’s initial goal and the amount initially specified in the Offshore Wind Economic Development Act Christie signed in 2010, but never implemented after the former governor worried the cost of the program would raise electricity rates too much. Regulations to implement the law were never adopted. Offshore wind may need large subsidies to attract investors. Many expect ratepayers will be asked to fund the subsidies through higher rates, though it’s unclear how soon that might happen.

“How do you get the power from the windmills to here, and how do you pay for it all?” Sara Bluhm, vice president, environment and energy, for the New Jersey Business & Industry Association (NJBIA), says, voicing perhaps the biggest unanswered question about the program.

BPU President Joseph L. Fiordaliso says the agency is establishing an interagency Offshore Wind Task Force with the state Department of Environmental Protection and other applicable state offices to develop a strategic plan for implementing Murphy’s order and that plan will answer lingering questions, including the cost.

“I believe we have a moral obligation to mitigate the effects of climate change,” Fiordaliso says. “The strategic plan is going to help us determine what the costs will be.”

Whatever the cost, offshore wind is going to bring increased economic growth to the state, through new business opportunities and jobs, Fiordaliso adds. And, any additional costs may not come this year, as the program is still in the planning phase.

According to its order, the agency also is starting the rulemaking process to establish a funding mechanism for Offshore Wind Renewable Energy Certificates, and BPU staff are also preparing to solicit for the initial 1,100 megawatt offshore goal and working with the state Department of Treasury on the OREC program.

RGGI

Another new Murphy initiative likely to impact businesses is his January order that the state rejoin the Regional Greenhouse Gas Initiative (RGGI), which requires power plants to buy permits for the carbon dioxide they emit, and the state can use revenue received from permit auctions to fund energy efficiency programs. Murphy said that after the state pulled out of RGGI in 2012, it lost $279 million in permit auction money that could have been used to improve air quality and increase energy efficiency.

When he withdrew from RGGI, Christie said – and many believe – that it would raise the cost of electricity for businesses and consumers. Bluhm agrees.

“That will increase the cost of electricity,” she says. “While it may not be a lot, it’s going to cost New Jersey. Right now, New Jersey has the cleanest generation within PJM (the regional transmission organization) and if our generators have to buy cleaner credits, that is going to cost more.”

The Nuclear Equation

It’s hard to say what a controversial $300 million annual subsidy to Public Service Enterprise Group for its Salem nuclear power plants will wind up costing businesses if it is approved. The idea is embodied in a bill that cleared a Senate committee in February. The utility has said it will close its two nuclear plants in South Jersey without a subsidy as they will stop being profitable in a few years and that would mean customers would have to pay more to replace that power. In the most latest development, PSEG, along with Exelon (a minority shareholder in the Salem nuclear power plants), reported they will stop funding capital projects – those not required to meet regulatory requirements – at the facilities unless the nuclear subsidy bill is passed.

“In sum, this bill is massive, and with each iteration it gets worse,” wrote Stefanie Brand, director of the Division of State Rate Counsel, in testimony submitted to the Senate Budget and Appropriations Committee that heard the bill. “It will add huge costs to the monthly bills of the customers you represent. There is no reason to proceed on the fly like this. There is no imminent emergency related to any of this.”

Bluhm says it is difficult to quantify the impact of the measure because it keeps changing.

“We are supportive of nuclear power, but this bill has a lot of other things in it as well,” she says. “What is the balance? What are we able to do to minimize the impact on the business ratepayers if the subsidy is put in place?”

Solar Power

Some complain the new federal 30 percent tax on imported solar panels will hurt the industry and slow the movement to renewable energy. But David M. Winslow, principal and senior vice president of GZA, a consulting firm with four offices in New Jersey, says that may not be the case.

“The tariff on solar panels from China is coming at a time when the solar industry is stable, but with 2017 sales slightly off from 2016,” he says. “The production tax credit renewals under the recent federal budget plan for renewables continue to favor solar, wind, combined heat and power, and micro turbines or microgrid businesses. Businesses investing in renewable energy and businesses that work in the renewable energy and microgrid power generation market should continue to grow.”

While there seem to be monetary implications of most policies, there are several other changes in policy at the state and federal levels that are expected to affect businesses in ways beyond the cash register.

Pendulum Swing

“I’ve been around long enough to know what happens when the pendulum swings,” Rodger A. Ferguson, Jr., president of Milford-based PennJersey Environmental Consulting, says. “This is a classic change from a Republican administration to a Democratic one, which means environmental enforcement will be stepped up. … My message to my clients for a while now has been to get your facilities into compliance.”

Winslow agrees, saying, “The governor has committed to reversing Christie Administration actions, which were perceived as rolling back essential clean water protections and potentially failing to address current threats to our water quality and quantity.”

Ferguson says the DEP is likely to propose new rules regarding residential heating oil tanks by June and set new standards for chemical compounds in drinking water.

Some lawmakers are also looking to boost environmental laws. A Senate committee held a hearing in February on legislation that would allow municipalities, counties and authorities to create storm water utilities to deal with runoff. These utilities could levy fees to finance storm water management systems to manage the pollution from rain water that drains into sewer systems. Bluhm calls it a “rain tax” and says businesses could wind up paying fees to multiple storm water utilities if the measure is enacted.

Not only is the DEP expected to strengthen standards, it is also likely to get tougher in enforcing laws.

Ferguson expects more rigorous enforcement of, for instance, the Site Remediation Reform Act, which requires that the progress of the cleanup of contaminated sites meets certain milestones.

That program itself is up for revision, according to Don Richardson, president of Parsippany-based EWMA.

“The SRRA regulations that govern New Jersey’s successful Licensed Site Remediation Professionals (LSRP) program are likely to be revisited and revised during Gov. Murphy’s first term,” Richardson says. “The goal of these updated regulations will be to further improve the LSRP process based on stakeholder input and lessons learned.”

Ferguson, president of the New Jersey Licensed Site Remediation Professionals Association, says the goal is to “make the LSRP program better and more efficient.”

National Issues

President Trump has proposed cutting the federal Environmental Protection Agency’s funding by between 30 and 40 percent – to levels as low as the 1990s – and cutting back spending on the federal Superfund program that helps clean up the most toxic sites by 30 percent.

“That cut would hamstring the EPA’s work and that trickles down,” Ferguson says. “There would be less enforcement by the EPA, less enforcement by OSHA … and the DEP gets a lot of money from the EPA to administer certain programs. The DEP could be faced with a huge budget shortfall. That could have a profound impact on how New Jersey operates.”

A recent change to the Occupational Safety and Health Administration’s Hazard Communication Standard to align the US with the international Globally Harmonized System of Classification and Labeling of Chemicals is affecting businesses and utilities that use chemicals that must follow the HCS, according to Richardson.

“Specifically, utilities and businesses that are required to complete a Community Right-to-Know Survey or Biennial Hazardous Waste Report must ensure that their reports comply with the updated HCS,” Richardson says.

The Trump administration also recently proposed streamline environmental reviews required by the National Environmental Policy Act to enable permits to be approved within two years. Statements by some Republican congressional leaders cast doubt on the plan’s passage this year, but even if it is approved, it may not negate the need to meet environmental regulations.

Conclusion

Ferguson says the landscape is definitely unsettled for businesses right now and will remain so until newly appointed state officials begin to make their marks in the areas of the environment and energy. He asks, “The question is, ‘How far is that pendulum going to swing?”

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New Jersey Sustainable Business Registry

Small businesses can get guidance and recognition for sustainability efforts.

The New Jersey Sustainable Business Registry (NJSBR) is part of a New Jersey Small Business Development Center (NJSBDC) program designed to recognize and promote sustainable businesses in the state.

“[The registry] is a way to join other businesses throughout New Jersey that have taken the time to tell us about five things that they are doing that are sustainability oriented,” says Ed Kurocka, NJSBDC sustainability program manager.

A company that wants to be part of the registry must submit five sustainability actions or practices that it uses, as well as identify a measurable environmental benefit and a cost savings benefit from at least one of the actions. This information can be submitted directly on registry.njsbdc.com at no cost.

Some of the reported measurable benefits to date from NJSBR members include: 10.7 million gallons of water reduced; 82,137 gallons of fuel reduced; 14.6 million pounds of waste reduced; 5.9 million kilowatt hours of electricity reduced; 134,099 less miles traveled; and $5.9 million saved. Kurocka also points out that, with the registry only requiring one measurable action to be reported, the total membership statistics are likely even greater.

The NJSBR was launched in the fall of 2014 and is a partnership between the NJSBDC and the New Jersey Department of Environmental Protection. Initial funding for the registry was provided by the US Environmental Protection Agency.

There are currently 116 companies on the registry, with membership growing by 48 percent from 2016 to 2017, highlighting the increased importance of sustainability and environmental responsibility to New Jersey business leaders.

Benefits for companies on the registry include free marketing and promotional materials, including the use of the NJSBR logo and a “sustainable business” seal, which can be displayed on the company’s website; a promotional profile of the company’s environmental efforts on the NJSBR website; and recognition and eligibility for the annual NJSBDC Sustainable Business Award.

“[The registry] is one of two components that NJSBDC is using to entice, inform, educate and help small- and medium-sized businesses either start or expand sustainable practices,” Kurocka says.

The other part of the sustainability program includes NJSBDC consulting from highly specialized experts.

“We have consultants who you can call or invite to visit your establishment, and they can tell you where you are and what you could be doing to improve not only your bottom line, but also the environmental impact to your community,” he adds. “The overall goal is to provide small business owners with the help and resources that larger companies have to incorporate or expand good environmental management practices in to their business plan, and gain recognition for it.”

 

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