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BPU Advised to Investigate Controversial Contract Between PSE&G and PSEG Power

Administrative law court judge recommends state agency look closer at decade-old agreement.

The state Board of Public Utilities plans to hold a proceeding to investigate whether a controversial gas contract between Public Service Electric & Gas and an affiliate is justified and whether the sister company should have been paying surcharges most other gas customers shoulder.

In approving a gas rate increase for the Newark utility, the state agency also decided to follow a recommendation by an administrative law court judge in the case to gather additional information on a dispute involving PSEG Power and details of a more than decade-old gas contract.

During hearings on a gas and electric rate increase sought by PSE&G, it was discovered that PSEG Power has never paid the societal benefits charge, a surcharge enacted in 1999 that requires virtually all gas and electric utility customers to help fund clean energy projects, low-income energy assistance programs and other utility-related programs.

Did PSEG Power Get Off Cheap?

In approving stipulated settlement in the rate case, Administrative Law Court Judge Walter Braswell recommended the board launch a proceeding into whether the power supplier should have paid the surcharge and other fees utility customers pay, as well as look into the terms of the gas contract between the utility and PSEG Power. In the case, lawyers for other intervenors argued the contract between PSE&G and PSEG Power offered the affiliate gas at one third the rate that four co-generation plants pay for the fuel.

The controversy led Sen. Robert Smith (D-Middlesex) to urge the Attorney General’s office to launch an investigation into the issue, which sources say is underway, and prompted a legal opinion from the New Jersey Office of Legislative Services which concluded all customers of a gas or electric utility are subject to paying the societal benefit charge, although the agency may have discretion in charging differing rates.

SBC Accounts for More Than $4 Billion

Since it was enacted as part of the state’s efforts to deregulate the gas and electric industry, the societal benefit charge has raised more than $4 billion, including $740 million last year. If PSEG Power had been paying the surcharge, it would have paid more than $300 million, according to Ev Liebman, director of program advocacy for New Jersey Citizen Action.

Steve Goldenberg, an attorney for the New Jersey Large Energy Users Coalition, said Friday after the board’s session he was happy the board was going to pursue the issues surrounding the company’s failure to pay various surcharges, but noted the record in the administrative law court proceeding clearly spells out the company was not justified in avoiding paying the fees.

In other matters, the agency approved a settlement in the utility’s gas rate case, affording it an increase in revenues of $26.5 million a year. Because of declines in natural gas prices, which make up about two-thirds of a customer’s bill, the typical residential customer can expect to see their monthly bills decline during winter months by about 5 percent, or $8.87.

"We’re pleased that bills will be declining for our residential gas customers," said Ralph LaRossa, president and chief operating officer of PSE&G. "However, the increase in overall distribution base revenues is necessary for us to continue to make the substantial investments in our gas delivery system to provide safe, reliable gas service."

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