With natural gas abundant and cheap, nuclear power's days may be numbered in N.J.

New Jersey’s biggest utility is telling state officials it may close two nuclear plants in Salem County if the flood of cheap natural gas accessed by fracking shale deposits makes them unprofitable.

Closing the Hope Creek and Salem reactors run by Public Service Enterprise Group, combined with the scheduled closure of Exelon's Oyster Creek plant in Ocean County, would leave New Jersey nuke-free.

But that would force PSEG to scramble for other ways to generate about half the electricity the state uses, and those alternatives all come with consequences of their own for the utility and for customers. 

PSEG chief executive Ralphi Izzo said shifting to gas alone would be more expensive because of added capital costs and price increases caused by increased demand. It also would increase carbon dioxide emissions by the equivalent of 3 million more cars, and make New Jersey more vulnerable to supply disruptions, especially during extended winter cold snaps, he said. 

"You would have 97 percent of the state's power coming from natural gas," Izzo said during a recent Washington, D.C. visit to receive an award from a trade group for the company building solar arrays on landfills.

Story continues after graph

"We believe gas is abundant, we believe it's going to be low-cost for a long time to come, but we also know at some time in the future you're going to have a polar vortex, you're going to have a disruption in a pipeline," Izzo said.

The company has "begun a conversation" with state officials about creating a "zero-emission credit" in the electricity market that rewards nuclear plants for not creating air pollution. Izzo argued that power sources such as wind and solar already get federal tax credits that compensate for their higher costs.

NEW JERSEY:Christie expands housing program for struggling families

ENVIRONMENT:Giant cage could help cut number of burned birds in Meadowlands

But several industrial power users, environmentalists and the senior citizen lobby AARP have formed the NJ Coalition Against Nuclear Taxes to fight the proposal. In a conference call on Wednesday, several coalition members argued PSEG is using scare tactics to fatten its bottom line, especially since Oyster Creek and Salem are currently profitable.

"PSEG is asking New Jersey legislators to take money from every citizen and give it to them without any justification," said Dennis Hart of the New Jersey Chemistry Council. "PSEG is making money, a lot of it. If their assertion is valid, they should open their books and give regulators and legislators more information."

Steve Goldenberg, an attorney and representative of the New Jersey Large Energy Users Coalition, said companies he represents wish they were doing as well as Public Service.

"When you hear the phrase zero emission credits or ZECs, I urge you to think of one word: Greed," he said.

Ev Liebman, associate state director for AARP, said New Jersey residents already pay some of the highest electricity bills in the country, and should not have to pay even more.

But John Kotek, a vice president at the Nuclear Energy Institute, the industry's trade association, said that's what will happen if PSEG shuts its plants.

"You're not going to make that up with existing generators. You're going to have to go out and build new facilities," he said. "So in any scenario, building new gas plants,recouping both the capital cost and the operating costs and the fuel cost is going to be more expensive than an existing nuclear facility."

Former Gov. Jim Florio, who built his career as an environmental warrior, said he was never a fan of nuclear power because of issues related to fuel storage and disposal, but he agrees with Public Service about the need to keep the plants operating.

"If you believe climate change is really that significant, then reducing fossil fuels has to be a priority. And if you take something that's generating 48 percent of our electricity without carbon emissions and replace it with something that emits, you're causing significant problems," Florio said.

But Doug O'Malley, director of Environment New Jersey and part of the coalition against the proposal, said a solution that exclusively focuses on propping up nuclear crowds out other solutions, including improved energy efficiency to reduce electricity needs.

"I don't think anyone in the coalition is saying they want the plants to be closed overnight, but this is an opportunistic move and we want more transparency," O'Malley said.

New Jersey is not the only place this scenario is playing out. Plants closed in recent years in Vermont and Wisconsin, while officials in New York and Illinois stepped in to prevent plants there from closing.

PSEG's critics say the plants in those states were worse off than New Jersey's.

Izzo agrees that his plants are profitable, and that's why the company isn't announcing plans to close right now. But he said that profitability calculation comes from looking at several contracts to sell power, some set set three years ago.

"So they're being paid higher than the current market price, and if we project out three years, the market price is going down," Izzo said.

"If the current market price doesn't change, those plants would be cash negative, at which point they would have to close, that would be our obligation to our shareholders. What we're pointing out to New Jersey is there are huge problems that would result from that," he said.