Inflation Reduction Act Helps Support Nuclear Power in New York State
New Yorkers Receive Hundreds of Millions of Dollars of Cost Savings
Governor Kathy Hochul today announced that thanks to the Inflation Reduction Act, millions of New Yorkers will see a reduction in utility bills. The IRA funding will help support New York’s nuclear power plants to deliver zero emissions electricity for New Yorkers. The federal nuclear production tax credit, passed by Congress and signed by President Biden as part of the IRA, will provide significant financial support to the four operating nuclear reactors in New York and thereby reduce future payments by New York electric ratepayers to these facilities.
“The Inflation Reduction Act has been critical to helping New Yorkers lower utility costs, while also helping the state reduce emissions and confront the global challenge of climate change,” Governor Hochul said. “We appreciate the strong partnership with President Biden, his Administration and New York’s Democratic Congressional Delegation to advance a more affordable and more livable New York through energy affordability and zero emissions electricity.”
The goals and policies of the IRA support initiatives and strategies previously established by the State of New York over the last decade. In 2016, in recognition of the adverse effects of climate change on public health, the environment, and the economy, the New York State Public Service Commission implemented the Clean Energy Standard (CES), a first-in-the-nation program to prescribe carbon reduction mandates for electricity production in New York. In 2019, the State enacted the Climate Leadership and Community Protection Act or Climate Act, a groundbreaking climate change statute addressing carbon emissions. The Climate Act seeks to reduce statewide greenhouse gas emissions 40 percent by 2030, and no less than 85 percent by 2050, from 1990 levels. The Climate Act also requires that the State’s electric grid be 100 percent zero-emission by 2040.
Chair of the Public Service Commission Rory M. Christian said, “I applaud President Biden, Governor Hochul and the U.S. Congress for their efforts to ensure the Inflation Reduction Act will support the continued operation of significant measures to address climate change. Most importantly, with the PTC action, the potential impact on consumers in states that have acted proactively to combat climate change should be addressed by recognizing the value of the environmental attributes associated with greenhouse gas-free generation of electricity at nuclear facilities.”
New York State Energy Research and Development Authority President and CEO Doreen M. Harris said, "This important federal support, made possible by President Biden's historic Inflation Reduction Act, will help ensure New York’s plants can continue to contribute to our nation-leading climate and clean energy goals while maximizing the opportunity to offer significant cost-savings to New Yorkers statewide. Constellation Energy has long been a partner in the State's efforts to provide reliable, zero-emission electricity to the power grid as part of its diverse portfolio of clean resources."
In August 2016, following a full administrative proceeding, the PSC created the New York Zero Emission Credit (ZEC) Requirement to preserve nuclear zero-emissions attributes. To implement the ZEC Requirement, the PSC authorized the New York State Energy Research and Development Authority (NYSERDA) to enter into multiyear contracts to purchase ZECs from qualifying nuclear facilities that demonstrated public necessity. Four nuclear powered reactors — Ginna, Fitzpatrick, and Nine Mile Point Unit 1 and 2 — were confirmed by the PSC as meeting the public necessity standard. ZEC contracts were entered into with NYSERDA on account of each plant’s verifiable historic clean energy contributions, insufficient market revenues expected by each plant, benefits and costs of ZECs compared to other clean energy alternatives, and the ratepayer impact of ZEC payments.
When it initiated the ZEC program, the PSC also recognized that the program could be adjusted in the future if the federal government later provided financial support for nuclear power facilities. The recently enacted federal production tax credit now provides such support.
The ZEC contract for each plant is administered in six two-year phases, with the first phase having started on April 1, 2017. The ZEC price in each phase is established by a base ZEC price that reflects the Federal government’s social cost of carbon, which may be adjusted downward and occurred with the start of fourth phase on April 1, 2023.
The ZEC contracts expressly provide that ZEC payments would be adjusted for a change in law that materially changes the original economic benefits of the contract, such as a federal tax credit aimed at nuclear production like the IRA production tax credit (PTC). When Constellation begins claiming the federal PTC reflecting its ownership in the upstate New York nuclear generation units on its corporate tax return in 2025 for tax year 2024, the PTC will be used to reduce the ZEC payments. The PTC will reduce the costs to New York electricity customers, potentially resulting in hundreds of millions of dollars in savings, as early as 2025.
Constellation Energy owns or controls the four operating nuclear power reactors in New York State located at the Ginna, Fitzpatrick, and Nine Mile Units 1 and 2 sites on Lake Ontario.