Question: What is the “Cuomo Tax” and what does it fund?
Answer: Governor Cuomo directed the New York Public Service Commission (PSC) to insert billions in subsidies for failing nuclear power plants into New York’s “Clean Energy Standard.” The upstate nuclear plants FitzPatrick, Ginna and Nine Mile Point are among the oldest operating nuclear plants in the US. They are losing money as they age and their operating costs rise, so the Clean Energy Standard the PSC adopted this summer imposes surcharges on New Yorkers’ electric bills to subsidize them and keep them open.
Unless the decision is reversed, electricity customers will be paying these surcharges on their bills for the next 12 years— from 2017 to 2029. The surcharges have nothing to do with funding “clean” energy. They are more like a new tax the Governor has imposed, forcing consumers to pay above-market rates to prop up aging, uncompetitive nuclear plants, whether they want to or not.
Q: Can they do that?
A: They’ve already done it, but it can’t be allowed to stand. Cuomo’s tax lacks policy, legal or technical justification, and contradicts state and federal laws. Legal analysts say he has exceeded his authority in imposing it. It’s simply a deal he cut with nuclear plant owners, transferring their risks from their shareholders to New York ratepayers. It enriches nuclear plant owners – one owner in particular – at the expense of all New Yorkers.
But the subsidies have attracted widespread opposition, and given enough of it, they can be defeated. They are subject to court challenges, and many citizens’ groups, businesses and elected officials actively oppose them. Many have petitioned the Public Service Commission to overturn the subsidies, and that would also effectively block the pending sale of FitzPatrick from Entergy to Exelon, since the subsidies are a condition of the deal. If it goes through, Exelon would own all four upstate nuclear plants. Entergy and Exelon asked the PSC for quick approval of the transaction at its upcoming November 17 meeting, asserting it “does not raise any issues” for New York’s retail electricity customers or wholesale electricity market. But other businesses have petitioned the PSC arguing the subsidies raise very serious issues – interfering with interstate commerce, discriminating against other forms of energy, and imposing “massively excessive costs [on] New York consumers.”
Q: How much will the Cuomo tax cost New Yorkers?
A: The price tag for subsidizing the Ginna, FitzPatrick and Nine Mile Point nuclear plants is $7.6 billion over 12 years. And even though Governor Cuomo has repeatedly said the trouble-plagued Indian Point nuclear plant in Westchester is unsafe and should shut down, there is potential for it to get another $2.8 billion, particularly if energy prices fall.
In all, the Clean Energy Standard could give over $10 billion of New Yorker’s money to the obsolete nuclear industry. Compare that to the $2.44 billion the Standard provides for true renewables such as wind and solar.
Q: How much of that will I have to pay?
A: The short answer is, you’ll find out when the surcharges start showing up on your electric bills next year. What we know now is that the nuclear subsidies will be collected from electric utilities, and each utility will pass those costs onto their customers. It’s like paying another tax, except some people will be taxed more than others. Charges will vary by region, utility and type of customer. Each utility makes its own calculation about how much to charge residential, commercial and industrial customers, depending on whose interests they choose to protect. No one knows yet what those calculations will be.
That’s a recipe for unfairness. Some utilities may put more of the burden on their residential customers. Higher electricity bills will disproportionately affect low-income households, including downstate, where they get little or no benefit from the electricity generated by upstate nuclear plants. “We have a lot of poor people in the downstate region that are going to have to be paying this very regressive tax and it’s not going to be at all transparent,” said Assemblywoman Amy Paulin, who chairs the New York State Assembly’s energy committee.
Other utilities may choose to put more of the burden on commercial and industrial clients, who could see their energy costs jump. The Business Council of New York State, normally a nuclear power booster, says these subsidies are so huge they place “energy-intensive businesses and the jobs and the communities that they support in mortal danger.”
And there are big regional inequities. A group of downstate New York state legislators wrote to the PSC calling the nuclear subsidies “unfair and unreasonable,” since the formula would force downstate electric customers to pay 60% of the costs, even though they don’t use anything like 60% of the power from upstate nuclear plants.
Question: Who gets the money?
A: Exelon Corporation owns Ginna and Nine Mile Point. Exelon also agreed to buy FitzPatrick on the condition that it would receive subsidies for it as well. When the purchase is complete Exelon would own all three upstate plants and would receive the entire $7.6 billion subsidy – the largest transfer of wealth from government to a single corporate entity in New York’s history. Exelon is a Fortune 100 company with annual revenues over $34 billion. It spent $430,000 on lobbying in New York in the last two years, including lobbying for the nuclear subsidies in the Clean Energy Standard.
Entergy owns Indian Point and stands to benefit from $2.8 billion in potential subsidies, as well as from the sale of FitzPatrick, which it currently owns, to Exelon. Entergy is a Fortune 500 company with annual revenues of $11.5 billion. From July 2014 through June 2016, Entergy spent $1.78 million on lobbying in New York State, according to records posted by the New York State Joint Commission on Public Ethics.
Q: Don’t we need nuclear subsidies to preserve jobs?
A: As a jobs program, the $7.6 billion to preserve a total of about 2,000 jobs at FitzPatrick, Ginna and Nine Mile Point for 12 years is a colossal waste of money, costing at least twice what it would take to just pay these workers’ salaries directly for 12 years. That’s wasteful and senseless, especially considering there are far better and far less expensive alternatives.
New York’s clean energy sector provides more jobs than the nuclear industry by orders of magnitude. Statewide, estimates range from 85,000 to 180,000 jobs in the clean energy sector such as solar, wind, energy efficiency retrofits, heat pumps, etc. While nuclear subsidies won’t create a single new job for unemployed New Yorkers, investing in clean energy creates many thousands.
For example, the NY-Sun solar incentive program, which invests $1 billion in State funds in solar power over 10 years, has already created 8,000 jobs in New York and counting, and it’s only halfway through its life. In this case, these incentives have been about 60 times more cost-efficient at creating new jobs than nuclear subsidies in the Clean Energy Standard would be at preserving old jobs.
Besides, we don’t need to keep Ginna, FitzPatrick and Nine Mile Point running in order to preserve many of their workers’ jobs. When they shut down, about half their workforces should be retained to help decommission them. We need a safe, measured decommissioning process for New York’s aging nuclear plants. The process takes many years to complete, and requires staff who know all the details of how a specific plant has been run and altered over the years. It’s critical to keep them on site to keep costs and radiation risks down after the reactors stop running. Decommissioning jobs are paid for out of decommissioning funds already set aside for the purpose, so they don’t impose any additional costs on taxpayers or ratepayers.
For those nuclear plant workers who do lose their jobs, investing in renewables and energy efficiency would mean job opportunity in a fast-growing clean energy sector. Instead of gigantic subsidies for failing nuclear plants, we should put resources behind a just transition plan to prepare displaced workers for these new jobs, and to compensate communities whose tax revenues go down when their nuclear plants close.
The deal environmental and labor groups reached with Pacific Gas & Electric to close California’s Diablo Canyon nuclear plant and replace it with zero-carbon renewables and efficiency is a case in point. It includes $400 million for retaining some plant workers for decommissioning, retraining others for jobs elsewhere in the utility, and compensating San Luis Obispo County for declining property tax revenues from the plant.
Using that approach in New York would leave affected workers and communities better off than making electricity customers pay upstate nuclear plant owners twice what they pay their workforces over 12 years. Instead of wasting billions on corporate welfare, New York could both replace property tax revenues for affected communities and provide wage support and training for displaced workers.
Q: What will happen to New York’s power supply when these nuclear plants close?
A: State and federal regulators take the reliability of the power supply very seriously and work to make sure that there are enough resources on the system, including backup resources, to maintain reliability. So it’s significant that a recent New York Independent System Operator assessment found there would be no impact on the reliability of electricity supply for New York if eight power plants – Ginna and FitzPatrick, plus three upstate coal plants, a co-generation plant and two New York City gas-fired plants – all closed by mid-2017.
The impacts of closing Nine Mile Point haven’t been studied, because closure has never been formally proposed. So far Exelon has only threatened to close Nine Mile 1, which is tied with New Jersey’s Oyster Creek for the title of the oldest operating nuclear plant in the US, unless the State subsidized it. Nine Mile Point 2 is newer and recently upgraded, and less likely to close soon.
If Exelon decided to close Nine Mile Point 1, it would trigger a reliability study. If that study projected any potential shortfall in the power supply, some analysts say it would be small and could be handled with energy efficiency measures, smart customer devices that help shift more of their electricity use to off-peak times, and by new power plants and transmission lines coming online. In any case, if a cheaper alternative to replace power from Nine Mile Point 1 wasn’t found quickly, it would qualify for a temporary subsidy until one was found.
Indian Point has a capacity of 2,000 MW, though it also spends an increasing amount of time offline due to emergency shutdowns. Studies show that all of Indian Point’s power could be replaced with renewables and efficiency, with zero impact on the reliability of New York’s electricity supply. In any case, even disregarding renewables and efficiency measures, new downstate power plants coming online (including two natural gas fired plants that were temporarily offline due to Hurricane Sandy) will largely replace Indian Point’s power.
In general renewables and efficiency are the best ways to replace aging nuclear plants, and they are scaling up fast. In fact, the New York Independent System Operator now projects that energy efficiency and wind power alone will soon replace the combined near-term output of FitzPatrick and Ginna (that’s even excluding solar and other renewables besides wind).
Unlike nuclear power, renewables and efficiency are clean, zero-carbon energy strategies that can help us fight climate change and build a sustainable energy infrastructure for New York. Unlike nuclear power, they are a powerful and growing source of new in-state job creation and economic activity. And unlike nuclear power, their costs are coming down while their energy production and energy savings are scaling up. The chart below shows that by 2030, renewables plus efficiency could produce and save twice the electricity generated by New York’s nuclear fleet. In other words, they could replace all New York’s nuclear power, plus an equivalent amount of power from fossil fuel-fired plants, with clean, zero-carbon energy.
Q: But isn’t nuclear power also clean, zero-carbon energy, and won’t it help us fight climate change?
A: Despite what the nuclear industry likes to claim, nuclear power is neither clean nor zero-carbon. In fact, New York’s aging nuclear plants are particularly dirty. They pose serious and growing threats to public health and safety as they reach the end of their lifespans. The longer they operate, and especially when they exceed their 40-year designed lifespans, the more radiation they leak into water and air, the higher the risk that critical components will fail, and the more spent fuel they build up on site in overcrowded fuel pools, which are now some of the highest concentrations of harmful radioactivity on the planet. While carbon emissions may not be coming out of their smokestacks during operation, nuclear power plants have a substantial carbon footprint over their lifecycle, from mining and milling uranium to constructing and decommissioning the plants.
Nuclear subsidies have no place in a clean energy plan to fight climate change. That was the conclusion the U.S. Environmental Protection Agency reached as it rejected the idea of giving nuclear plants credit for greenhouse gas emissions reduction under its Clean Power Plan. As EPA pointed out, maintaining existing nuclear plants does nothing to reduce carbon emissions, it just maintains the status quo. But adding new renewables and efficiency measures cuts GHG emissions deeply. Taking resources away from them to subsidize a dying nuclear industry undercuts the fight against climate change.
Q: Will nuclear subsidies help meet New York’s clean energy goals?
A: The Clean Energy Standard calls for reducing GHG emissions 40% and getting half our electricity from renewable sources by 2030. Those are positive, aggressive goals we support, but nuclear power won’t help us reach them. It will hinder us.
For one thing, at least two of the four upstate reactors in line to receive Clean Energy Standard subsidies over the next 12 years are slated to shut down before 2030 due to license expiration, so they won’t be making any contributions to achieving 2030 goals.
For another, diverting billions from renewables and energy efficiency to bail out failing nuclear plants may put those goals beyond reach, because renewables and efficiency are the best ways to meet clean energy goals. They are about six times more effective at cutting New York’s carbon emissions than subsidizing nuclear plants, and by 2030 renewables alone could generate 97,400 GWh – roughly twice the electricity that New York’s nuclear fleet produces today.
What threatens the climate goals laid out in the Clean Energy Standard is not retiring failing nuclear plants; it’s the possibility that New York will not pursue energy efficiency and renewable energy aggressively enough. They’re growing rapidly, but locking in billions in corporate welfare for Exelon for the next 12 years would hamstring their further development. For a detailed scenario of how New York’s nuclear plants could be replaced with renewables and efficiency, without burning more fossil fuels, see the appendix in this document.
Q: What impact will the subsidies have nationally?
A: A very destructive one. New York set a national energy policy precedent as the first state to ban fracking. But unless the Cuomo tax is overturned, New York will set a very different and far-reaching precedent as the first state to divert billions to failing nuclear plants in the name of “clean energy” and fighting climate change. Experts say this precedent could trigger a seismic shift in the way states treat their nuclear facilities.
There are already indications that other states might follow suit, and that the federal climate protection measures like the Clean Power Plan might get revised to include federal Clean Energy Standard-style subsidies for nuclear plants. That would cost all Americans hundreds of billions in surcharges, distorting national energy markets and taking massive resources away from investing in renewables and efficiency. And it would put us all at increased risk by propping up old, unsafe nuclear plants across America that can’t compete, and should shut down.