48:3-98.2 Findings, declarations relative to a long-term capacity agreement pilot program to promote construction of qualified electric generation facilities.
1. The Legislature finds and declares:
a. In 2007, PJM Interconnection, L.L.C., the firm that manages the regional electric power grid, changed the method of procuring capacity in the wholesale electricity market with the implementation of the reliability pricing model;
b. The PJM reliability pricing model sought to create enhancements to the previously ineffective capacity procurement mechanism which had resulted in projected capacity deficiencies in New Jersey and other areas of the regional power grid. While the reliability pricing model has resulted in significant capacity additions in the form of new demand response resources, new energy efficiency resources, reversals of generation unit retirements, upgrades of existing generating units and certain new peaking facilities available to the region and the State, the reliability pricing model has not resulted in large additions of peaking facilities or any additions of intermediate or base load resources available to the region and the State;
c. The PJM reliability pricing model could, through structural changes, provide necessary incentives, such as the expansion of the "New Entry Price Adjustment" mechanism for the construction of new capacity, including new intermediate and base load plants, by allowing new resources to qualify and receive a guaranteed capacity price for a longer period of time. However, the implementation of similar structural changes was previously denied by FERC and any future implementation is uncertain at this time;
d. To address the lack of incentives under the reliability pricing model, the construction of new, efficient generation must be fostered by State policy that ensures sufficient generation is available to the region, and thus the users in the State in a timely and orderly manner;
e. Due to PJM's lack of authority to order new generation as a means to mitigate local electrical system reliability concerns and solve other issues related to the lack of local generation, and since only PJM has the authority to order transmission system upgrades and expansions to mitigate electrical system reliability concerns caused by transmission system overloads or the lack of local generation being developed, New Jersey is experiencing an electric power capacity deficit and high power prices that may result in the loss of jobs and investment due to the necessity for the upgrade of the transmission system to the west of New Jersey to ensure a reliable supply of electricity and capacity from generators located outside of New Jersey;
f. As a result of a lack of new, efficient electric generation facilities, New Jersey has become more reliant on coal-fired power plants;
g. The PJM State of the Market Report for 2009 by the PJM Independent Market Monitor states that there are over 11,000 megawatts ("MW") of coal-fired units at risk of retirement due to their inability to cover their avoided costs;
h. New Jersey's in-State fleet of electric generation facilities is aging, with over 50 percent of these facilities being more than 30 years old and over 70 percent being more than 20 years old; and
i. Fostering and incentivizing the development of a limited program for new electric generation facilities will help ensure sufficient capacity to stabilize power prices to assist the State's economic development and create opportunities for employment in the energy sector while helping to reduce the cost and volatility of electricity prices in New Jersey.
L.2011, c.9, s.1.