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No Refunds, No Rate Adjustments for PSE&G and PSEG Power

Despite what some say are hundreds of millions in skipped surcharges, Newark utility and its affiliate are unlikely to be disciplined by the BPU.

Public Service Electric & Gas and its affiliate PSEG Power will not be required to refund or make any rate adjustments stemming from a gas contract in which the power supplier avoided paying hundreds of millions of dollars in special surcharges paid by most other utility customers.

A proposed stipulated agreement expected to be acted on by the New Jersey Board of Public Utilities (BPU) on Thursday would quietly resolve an issue that had caused an outcry among some lawmakers and public-interest groups when it was revealed that PSEG Power had never paid the so-called societal benefits charge (SBC) on gas it purchased from the Newark utility.

The surcharge was enacted as part of the state law deregulating the energy industry in 1999. It has raised nearly $4 billion from gas and electric customers to fund clean energy programs, energy assistance programs for low-income residents, and cleanup of contaminated coal gasification plants.

Nearly $50 Million A Year

By one estimate, PSEG Power avoided $47 million last year by not paying the surcharge, which, for some manufacturers, amounts to more than $1 million a year. After it was revealed the company had avoided the surcharge, the New Jersey Office of Legislative Services (OLS) issued a legal opinion saying the state should not exempt the supplier from paying the fee.

In the stipulated settlement, the issue is resolved in a single paragraph that states "there will be no retroactive adjustments to rates and no refunds with respect to the rates charged by PSE&G for any gas transportation service." It offers no explanation for that decision, which was criticized by consumer advocates.

“We think it’s a terrible settlement," said Ev Liebman, program director for New Jersey Citizen Action. “As far as we know, just about every other ratepayer is paying this surcharge. Why they should be left off the hook seems to be another instance of special treatment for an entity that needs no special treatment."

"Paying Their Share"

Dena Mottola Jaborska, executive director of Environment New Jersey, agreed. "If Public Service wants to be recognized as supportive of green energy programs, then they ought to be paying their share of the SBC."

The stipulated agreement only covers the period between the onset of the societal benefit charge up until the rate case. The board has a separate ongoing proceeding to determine whether power suppliers should be exempted from paying the surcharge as some people have argued. The rationale behind that stance is it might lead to lower electric bills for customers if suppliers did not have to pay the SBC.

The agreement does include a credit for some customers, however. The New Jersey Large Energy Users Coalition, a group representing pharmaceutical and other manufacturers, will receive a credit of $765,000. Steven Goldenberg, an attorney for the coalition, declined comment on the settlement.

In addition, the Morris Energy Group secured a new gas rate from PSE&G, which is more competitive with the gas rate being charged to PSEG Power, according to Stefanie Brand, director of the Division of Rate Counsel. In the prior rate case, Morris Energy Group argued its then-gas rate put it at a competitive disadvantage, resulting in its plants running less often than competitors'.

Finally, the agreement recommends that the whole issue of whether a power supplier should pay the societal benefit charge, as well as a surcharge for a program to reduce greenhouse gas emissions and another fee to pay off infrastructure, should be quickly resolved and determined by the board.

While critics of the agreement held out hope the board would reject it, most said they expected it be approved. "It just shows the board cares more about PSEG's bottom line than it cares about consumers," said Jeff Tittel, executive director of the New Jersey Sierra Club.

Asked to respond to the settlement, PSE&G spokeswoman Bonnie Sheppard said the gas contract had been approved by the state BPU without any SBC payment or other surcharges.

BPU officials did not respond to calls for comment.

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