Why Electric Bills in New Jersey Might Be About to Drop
Federal funding from the Inflation Reduction Act is putting an end to an unpopular utility surcharge for nuclear power plants.
Federal aid provided by the Inflation Reduction Act is about to replace a $300 million annual subsidy for New Jersey's three nuclear power plants -- and cut New Jerseyans' power bills.
Since 2019, ratepayers from the Garden State have been coughing up $78 per year for a surcharge to subsidize the state's three biggest nuclear power plants. Funding provided by the federal Inflation Reduction Act, called production tax credits, will replace the current subsidies paid by consumers.
The production tax credits don't go into effect until June 2025, however, and ratepayers will still see this surcharge on their bills until then. It's unclear if the federal funding provided by the Inflation Reduction Act could affect the rising energy rates in New Jersey on a broader scale. The state's electricity rates rose from 16.68 cents per kWh in 2022 to 17.59 cents per kWh in 2023, a 5.5% increase in price.
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Here's what you need to know about when the New Jersey energy surcharge is coming to an end, and how that might affect your energy bills.
Why were these plants subsidized?
New Jersey's Salem I, Salem II and Hope Creek nuclear power plants are crucial energy generators for the Garden State, generating roughly 40% of the state's electricity. They also account for 85% of its non-fossil-fuel generation.
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In 2019, the utility companies that own the plants -- Public Service Enterprise Group and Constellation Energy -- threatened to shut down the plants if they weren't subsidized. The companies said that could have led to the elimination of 6,000 jobs and the loss of energy generation to power 3 million homes.
The New Jersey Board of Public Utilities approved a surcharge to residential and commercial ratepayers. New Jersey homeowners have been paying an additional $78 surcharge annually since the decision, and energy-intensive businesses have been charged significantly more. Since it went into effect, the subsidy has generated more than half a billion dollars for PSEG's and Constellation's nuclear power plant operations each year.
The Inflation Reduction Act funding will replace the $300 million a year that customers across New Jersey are currently paying. The Board of Public Utilities has approved the production tax credits, and they'll go into effect in 2025.
How will this affect New Jersey ratepayers?
As the grid is updated and improved and New Jersey adopts solar energy at an increasingly rapid pace, residential and commercial ratepayers sometimes face higher electric bills as part of the growing pains associated with grid modernization. But federal funding through the Inflation Reduction Act might soothe those pains.
New Jersey's energy market has been deregulated since 1999, meaning that for 25 years homeowners have had the ability to choose which company powers their home. Utility rates vary between the New Jersey electricity generators, including PSEG and Constellation Energy, which both have a stake in nuclear power generation in the state.
Regardless of whether you've chosen PSEG, Constellation or another energy provider for your home, you'll be seeing one less surcharge on your utility bill throughout the year, starting June 2025.
If you want to learn about how to choose which company generates your electricity in a deregulated energy market, read more here.
The surcharge and its significant effect on energy bills also points to the importance of understanding your electric bill and figuring out where your money is going each month. Charges like this one happen regardless of how much energy you use, but you can still reduce your costs further by taking steps to cut your electricity usage, such as by unplugging appliances when you don't need them.