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PSEG To Retire 1,200 MW of PJM Capacity In 2017

October 6, 2016

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Copyright 2010-16 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

PSEG announced today that its coal-fired Hudson Generation Station in Jersey City, N.J., and its Mercer Generation Station in Hamilton Township, N.J., will be retired on June 1, 2017.

Collectively, the plants represent approximately 1,200 MW of capacity.

"The sustained low prices of natural gas have put economic pressure on these plants for some time. In that context, we could not justify the significant investment required to upgrade these plants to meet the new reliability standards," said Bill Levis, president and chief operating officer of PSEG Power. "The plants have been infrequently called on to run and neither plant cleared the last two PJM capacity auctions. The plants' capacity payments have been critical to their profitability and PSEG's ability to continue to invest in modernizing them."

The decision to retire the Hudson and Mercer plants early triggers certain changes in accounting treatment that will have a material effect on PSEG's and PSEG Power's reported results. In the third quarter of 2016, PSEG and PSEG Power expect to recognize one-time charges in Energy Costs and Operation and Maintenance expense ranging from an estimated $40 million to $70 million and $35 million to $77 million, respectively, related to the cost of shutting down these units, including coal and other materials and supplies, inventory reserve adjustments, employee-related continuance, and severance benefits costs.

In addition to these one-time charges, there will be ongoing annual incremental non-cash charges to earnings of $560 million to $580 million in 2016 and $940 million to $960 million in 2017 due to the shortening of the expected economic useful lives of the Hudson and Mercer plants.

Mercer Generation Station was opened in 1960. It currently has a capacity of 632 MWs. Hudson Generation Station was opened in 1968 and had a capacity of 620 MWs.

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