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CEO tells Somerset group that the regulatory uncertainty casts long shadow over utility industry

BY JOE TYRRELL

NEWJERSEYNEWSROOM.COM

The U.S. Senate's failure to enact a national energy policy means "pain" for the country and its utility companies, according to Ralph Izzo, chairman and chief executive officer of Public Service Enterprise Group.

"What it means is that we're going to see energy regulation by the courts," with the potential for years of legal wrangling over projects and regulations, Izzo said at a luncheon of the Somerset County Business Partnership.

Uncertainty over regulations and costs casts a long shadow over a company dependent on long-range planning, such as possible construction of another nuclear reactor in New Jersey.

While PSEG Nuclear has taken the initial steps to start the application process, "without a price on carbon, just the economics of nuclear and the risk/reward make it hard for a regulated company like mine to move ahead," he said at Fiddler's Elbow Country Club in Bedminister.

"Carbon pricing" refers to the economic transition away from polluting fossil fuels such as oil and particularly coal, which remains the leading fuel for much of the nation, to cleaner but often less efficient energy sources.

Izzo repeated his long-standing support for "cap and trade," creating a market for cleaner companies and power plants to sell pollution credits to dirtier ones, helping to fund improved technology while providing leeway for laggards.

Many business interests have pushed such a system, preferring it to higher taxes on sources of pollution or increased regulations, as the United States makes a belated effort to address global warming.

But cap-and-trade market also creates losers. For Newark-based PSEG, the effects cut both ways, potentially helping its nuclear, gas and alternative energy businesses, but penalizing fossil fuel plants that would incur higher costs because if required to buy credits.

Last year, the House of Representatives passed an energy policy including cap-and-trade, but that simply triggered more intense opposition by the coal and oil industries in the Senate. Joined by Republicans and conservative Democrats, they got Senate Majority Leader Harry Reid (D-Nev.) and the Obama Administration to blink.

"I still think cap-and-trade is the solution, but the U.S. Senate does not agree," Izzo said. "There does not look like there's any chance this year," even in a prospective lame-duck session following the November election, he said.

The federal Environmental Protection Agency has authority under the Clean Air Act to regulate polluters. After years of quiescence, it has begun moving aggressively for stronger limits on harmful emissions.

That could have some harsh repercussions for utilities, because "over one-third of greenhouse gasses are emitted by my industry," Izzo said. Supporters and opponents of clean air rules are likely headed for court battles over new regulations, whatever they say, he predicted.

The impasse could last until "different parts of the energy industry go back to Congress and say, 'Get us out of this mess,'" Izzo said.

The view is shared by observers with other perspectives on energy policy and the dysfunctional Senate, where Reid's Democratic majority has conceded to Republican insistence on the custom of a 60-vote super-majority.

"We tried to find people of good purpose on both sides and build bipartisan coalitions," Steve Cochran of the Environmental Defense Fund said in an Internet chat. "But there just aren't very many people in Washington to adopt that sort of approach."

One of the coal industry's congressional champions, retiring Sen. Byron Dorgan (D-N.D.), told Politico that he delivered a stern message to his side not to celebrate their victory over the energy policy.

"With or without carbon regulations, there will be a substantial conversation to natural gas, and coal will lose," Dorgan said.

Izzo also touted natural gas, saying supplies of that cleaner-burning fuel discovered in shale deposits could help supply PSEG customers here and elsewhere for the next century.

But he also made a strong pitch for greater energy conservation, and for giving utility companies a larger say in implementing it. Somebody has to, Izzo told the Somerset crowd.

"I remember Jimmy Carter in his brown sweater telling us to conserve energy 35 years ago — and the market still hasn't responded," Izzo said.

Bringing that message to corporate executives, Izzo said he has been dismayed by their short-term horizons. While PSEG expects 26 years to recoup its investment in a new plant, the average executive elsewhere expects energy saving technology to pay back its cost within two years, he said.

"I had one executive of a Fortune 50 company tell me that he wants payback within three months," Izzo said. "There's a flaw in the market," creating unrealistic expectations and so inaction, he said.

Meanwhile, many of the solar panels PSEG uses now come from China, Germany and Denmark have taken the lead in wind power, and Britain and Israel are forging ahead in electric cars, Izzo said.

Joe Tyrrell may be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it