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PSE&G Rate Request on Hold for Review of SBC Matter

BPU likely to put off action until state Attorney General completes investigation of PSEG Power's skirting of fees.

The state Board of Public Utilities is expected to defer action on a gas rate request by Public Service Electric & Gas until the Attorney General’s office finishes an investigation into an affiliate’s non-payment of millions of dollars in surcharges paid by most other utility customers.

According to sources familiar with the case, the rate request is on the state’s agenda for its bi-monthly meeting in Trenton today, but the commissioners are expected to hold off action until after a review of how PSEG Power avoided paying the societal benefits charge (SBC).

The surcharge, enacted when the state broke up New Jersey’s electric and gas monopolies, is a fee on gas and electric bills, which helps fund a variety of state programs: clean energy projects, energy assistance for low-income households, decommissioning of nuclear power plants and cleanup of contaminated gas manufacturing plants.

Last month, NJ Spotlight disclosed that PSEG Power has never paid the SBC charge, even though it is PSE&G's largest gas customer and accounts for one-third of the gas the utility delivers to customers. The state collected $740 million from the charge last year, and has gathered more than $4 billion since it was established in 1999.

PSE&G has said the gas contract arrangement with its affiliate was the subject of numerous proceedings before the state BPU, a view that is disputed by the agency’s staff and others involved in the gas case. Under a stipulated settlement before the agency, PSE&G would be granted a $26.5 million increase in its gas rates; earlier this month, the agency approved a $73.5 million increase in electric rates for the state’s largest utility.

As part of the settlement, an administrative law court judge also recommended the state launch a new proceeding to determine which companies avoid paying the SBC and how many other large businesses receive favorable gas rates from the utility.

The Attorney General’s office refused to acknowledge an investigation is underway, but multiple sources have said both the BPU and Governor’s office do not want to make a decision on the rate case until the review is concluded. The investigation was requested by Sen. Bob Smith (D-Middlesex), the chairman of the Senate Environment and Energy Committee, after NJ Spotlight disclosed the arrangement.

In an Office of Legislative Services legal opinion also sought by Smith, legal counsel concluded that all customers of an electric or gas utility are subject to paying the SBC, but the board appears to have the authority to allow different energy customers to pay different SBC rates.

The arrangement between PSE&G and PSEG Power has angered consumer advocates and some business groups who argue it saddles residential and business customers with picking up the power company’s share of the fund. Ev Liebman, director of program advocacy for New Jersey Citizen Action, said the company may have avoided up to $300 million in surcharges by not paying the fee.

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