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BPU Considers Rolling Back Or Ruling Out Surcharges Paid By Big Businesses and Academic Institutions

Some large energy users claim they shell out more for surcharges than they actually pay for power.

Credit: Photo: Princeton University, Office of Communications, Denise Applewhite.

With the state granting some relief to medium-sized businesses on their energy bills, the question now is whether regulators are ready to do the same for some of New Jersey’s largest companies and institutions.

The issue has long been a bone of bitter contention among the state’s largest energy users and is now the subject of an ongoing proceeding before the state Board of Public Utilities (BPU). Should the state re-examine and possibly phase out or cap surcharges large customers now pay to help fund a program to curb greenhouse gas emissions?

The proceeding, just getting underway, promises to be contentious. The state’s Division of Rate Counsel is opposed to granting relief to so-called large energy users, a coalition comprising manufacturers, pharmaceutical companies and others, saying it would result in other utility ratepayers shouldering an unfair burden.

Meanwhile, other parties, including Gerdau Ameristeel Corp., are pressing the state agency to expand the scope of the proceeding to include the societal benefits charge (SBC), another surcharge on utility bills, which last year raised $740 million. The surcharge pays for a variety of programs, among them funding for much of the state’s clean energy efforts and programs to help low-income residents pay their energy bills.

Easing the Burden on Small Businesses

The debate follows the decision earlier this week by the BPU to phase out the retail margin fund, still another surcharge on electric bills, which raises about $13 million a year from about 850 small businesses, mostly big box stores, anchor stores in malls and small hospitals.

While significant, the retail margin fund pales in comparison to the amount of money raised by the SBC, or the specific subject of the proceeding, the Regional Greenhouse Gas Initiative (RGGI). For instance, Princeton University in the fiscal year 2010, paid $1.27 million in societal benefits charges and another $64,912 in RGGI surcharges, according to an affidavit submitted by Thomas Nyquist, director of engineering for the university.

“Some of my guys got relief,” said Hal Bozarth, executive director of the Chemistry Industry Council of New Jersey, referring to the BPU action on Tuesday. “But we have energy rates 80 percent above the national average. If you want to see more good, high-paying manufacturing jobs and the research and development that follows them, then lower energy costs.’’

That assessment was echoed by others.

“In an already difficult economic climate, the adverse impact these mounting surcharges have on the ability of New Jersey businesses to remain viable and cost competitive can no longer be minimized or ignored,” wrote Steve Goldenberg, an attorney for the New Jersey Large Energy Users Coalition, which petitioned originally for the proceeding.

The various surcharges that have been added to utility bills, Goldenberg noted in what he termed “an inconvenient truth” now constitute a significant portion of the total bills, costing more in fact than what the electric utility charges to deliver the power to a business.

In his brief, he proposes a variety of options to offer his clients some relief from the RGGI surcharges, including an opt-out that would allow a customer to escape the surcharge if it could demonstrate it had already undertaken privately funded energy efficiency measures or steps to reduce energy use during times of peak demand. The coalition also proposed a cap be imposed, limiting the total cost of the program.

Protecting Consumers

In response, the state Division of Rate Counsel argued the coalition is seeking to reduce large customers' contributions to the cost of the RGGI program, a step that would result in increasing the rates paid by other customers.

Stefanie Brand, the director of the division, also disputed assertions by the large energy users that they do not benefit from the energy efficiency and renewable energy programs funded by the surcharges. She stated that the 2010 Clean Energy Program budget, which targets nearly $125 million out of a total of about $273 million for energy efficiency programs, directly benefits commercial and industrial customers.

Jeff Tittel, executive director of the New Jersey Sierra Club, said the decision on the retail margin fund bodes badly for consumers and homeowners. “I think that’s the direction they are going to go. The average homeowner is going to wind up paying the tab for big business,” he said.

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