Millions of New Yorkers will see a reduction in utility bills thanks to the Inflation Reduction Act. Governor Kathy Hochul on Tuesday said 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.
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.
