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State Studies How to Fund Next Round of Clean Energy Programs

With many unanswered questions, the most important may be what level of funding should come from ratepayers

The state is beginning to examine how to fund clean energy programs over a four-year period beginning in 2013, a decision that could dramatically reshape New Jersey's aggressive policies to reduce energy consumption and to promote cleaner sources of electricity, such as solar and wind.

At a time when there are many unanswered questions about the future of the state's energy policy, the Office of Clean Energy is asking industry executives, utility officials, and clean energy advocates to comment and to respond to 39 questions dealing with energy efficiency, renewable energy, and perhaps most importantly, how and what level of funding should come from ratepayers.

Given the thrust of the questions, the proceeding likely will lead to a lowering of historical funding levels, which, since the state initiated the clean energy program more than a decade ago, have steadily risen to keep pace with New Jersey's aggressive goals for developing solar energy and curbing energy use.

On the Fast Track

Just how fast the program has grown can be seen in comparing the first four-year funding level approved for 2001-2004, which amounted to roughly $482 million -- less than half of the $1.2 billion budget for 2009-2012.

That growth has attracted strong criticism, primarily because the programs are financed by a surcharge, dubbed the societal benefit charge (SBC), on utility bills, a cost that has grown exorbitant to heavy users of electricity and gas, according to business lobbyists. While relatively modest for residential customers, amounting to approximately $5 a month, the surcharge can hike bills for big manufacturers and institutions by as much as $1 million a year, and even $25,000 a year for small manufacturers.

For the next two years, however, not much is expected to change. The state is funding clean energy programs at a level of $319 million this year and plans to increase it to $379 million in 2012. The Christie administration appears to ready to change course, beginning in 2013.

For instance, the survey asks stakeholders, "What revenue-generating mechanisms should the board pursue to achieve the EMP (energy master plan) goal to reduce or eliminate the SBC charge?" Later, it seeks an answer to whether "can EMP goals be met by totally replacing the current loan program with a revolving loan program?" Or this, "Provide suggestions of how additional funding for new programs can be generated outside of electric and gas ratepayer-funding mechanisms to meet the policy goals."

Skipping Solar

Surprisingly, only one question mentions New Jersey's solar program, perhaps the most successful initiative adopted by the state in the past decade. With generous subsidies, New Jersey is second to only California in the number of solar systems installed, with more than 10,000 projects in operation. In recent weeks, however, there has been rising concern over whether the market is overbuilt, a fear that has led to a drastic drop in the price of solar renewable energy certificates (SRECs), which have fallen from selling in the mid-$600 range to below $200, a decline some worry might stall the sector's continued growth in the state.

The revolving loan program has been mentioned frequently by BPU President Lee Solomon, ever since he took over leadership of the agency, where the Office of Clean Energy is located. The state currently funds improvements to wastewater treatment authorities through a revolving loan fund, but some clean energy advocates have questioned how successful such a program would be in promoting clean energy programs.

In the June draft energy plan, the administration talked about reducing the surcharge by either creating a revolving loan program to finance clean energy programs or establishing an "energy efficiency utility," which would provide zero- or low-interest loans to customers, who would repay the money from the energy savings they reap.

The administration is seeking comments from the public even as a working group has yet to submit its recommendations on how to fund clean energy programs. One of four separate working groups set up by the BPU to address issues raised by the draft energy plan, it is the only one yet to have its recommendations made public -- an indication of how politically explosive the issue can be. The agency already has scheduled a public hearing on the issue for a week from Friday.

The new plan has been heavily criticized by clean energy advocates, who worry it will lead to a scaling back of the state's efforts to promote cleaner sources of electricity and to curb energy use. But it has won widespread support from business lobbyists for its emphasis on trying to reduce steep energy bills in New Jersey, primarily by encouraging new generation in the state.

That issue also is expected to be a focus of the proceeding, since the agency asked stakeholders to provide suggestions on how state funding and state clean energy programs might help reduce electric and gas rates. With the draft plan's endorsement of combined heat and power plants as a way to reduce energy bills, that technology is sure to generate support for enhanced funding and backing from the state. Combined heat and power plants produce electricity and heat simultaneously, a technology that can reduce energy use.

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