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Court OK's Raid on New Jersey Clean Energy Fund

Appeals court upholds diversion of $158 million to plug hole in this year's state budget.

That was then. This is now.

It is a common refrain from politicians explaining a shift in positions, but it essentially summed up an appeals court ruling affirming the diversion of $158 million in clean energy funds to plug a hole in the current state budget by the Christie administration and legislature.

In a 14-page decision, the three-judge panel ruled Friday that the diversion of funds is appropriate because previous courts have found the legislature has the authority to change or suspend the operation of its prior enactments through an appropriations act.

In addition, the court noted previous legislatures had approved the diversion of smaller amounts of clean energy funds in the prior two budgetary fiscal years, a practice that is expected to be continued this year with the Christie administration proposing to divert approximately $40 million in clean energy funds.

The decision is a blow to small solar system installers who brought the lawsuit under the trade organization Mid-Atlantic Solar Energy Industries Association, which for years has relied on state clean energy funds to help build a profitable business model.

It also illustrates a vivid example, according to critics of the practice, of the way politicians can plug budget holes by diverting funds from previously approved programs that are financed by fees and surcharges, allowing them to avoid being blamed for increasing one of the more visible state tax revenue sources, such as the income or sales tax..

The clean energy funds date back to the deregulation of the energy industry in 1999. One of the compromises made in the legislative process established a new surcharge on customers’ gas and electric bills to pay, in part, for promoting energy efficiency programs and renewable energy projects, such as installing solar systems on residences and businesses.

Called the societal benefits charge (SBC), the cost was modest initially, but as state efforts to promote clean energy projects and to help low-income households pay utility bills grew more aggressive, the fund mushroomed. The budget for the program is set by the New Jersey Board of Public Utilities (BPU) and rarely is given much scrutiny by the news media.

In the more than decade it has been in effect, the surcharge has raised nearly $5 billion, and $740 million last year alone. The cost is especially onerous to businesses that use large amounts of energy, costing some companies more than $2 million annually just for the surcharge and not including the cost of electricity.

The concerns have led the president of the BPU to talk repeatedly about ways to scale back the surcharge, possibly replacing it with a state revolving loan fund to finance clean energy programs, similar to the way the state helps county and local governments fund upgrades to water and wastewater treatment plants.

In the decision, the three-judge panel agreed there is no doubt the imposition of the surcharge would be used for the purposes set forth in the deregulation law. Citing an earlier court decision, the court said "definite legislative intent as reflected in the general appropriations laws necessarily supersedes any previously expressed legislative desires at least for the duration of the particular appropriation act. The earlier statutes cannot coexist with the enacted appropriation and, consequently, must be deemed suspended by adoption of the later appropriation acts."

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