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Pilot Will Deploy Refueling Stations for Compressed Natural Gas

Tom Johnson | June 19, 2012

CNG refueling stations chiefly intended to serve companies converting fleets to natural gas.

In a step that reflects a goal of the state Energy Master Plan, regulatory officials yesterday approved a pilot program to allow a utility to spend up to $10 million to build compressed natural gas (CNG) refueling stations in its service territory.

The state Board of Public Utilities approved the one-year pilot proposed by New Jersey Natural Gas to build between five and seven CNG refueling stations at companies that plan to convert a portion of their fleets to run on the fuel, as well as provide opportunities for the public to fill up their natural gas vehicles.

The pilot is viewed as helping the state's efforts to boost the market for alternative-fuel vehicles, a strategy they hope will reduce reliance on petroleum-based fuels, lower transportation costs for consumers and businesses, and curb emissions that contribute to global climate change.

"The need for greater fuel diversity has never been more important," said Laurence Downes, chairman and chief executive officer of NJNG. "With the availability and price benefit of today's natural gas, we have an opportunity to help grow our economy and protect our environment by encouraging the market for alternative-fuel vehicles, and that's good for New Jersey and our future."

That view was not embraced by the New Jersey Division of Rate Counsel, which declined to sign a stipulation between the BPU and the utility allowing the pilot to go forward. It argued that the proposal would saddle NJNG customers with subsidizing the cost of promoting alternative-fueled vehicles at companies that convert their fleets to run on CBG.

In a letter to the BPU, the agency argued that the program is not cost-effective for ratepayers and suggested the costs for implementing it should be paid by the subscribers to the service.

"The subscribers, who are likely to be larger commercial customers with fleets of CNG vehicles, will reap the benefits of the program and should, therefore, pay for it without a subsidy from other ratepayers," said the letter submitted by Stefanie Brand, director of the office of Rate Counsel.

Based on information submitted by the utility, Rate Counsel argued that customers would have to pay a cumulative subsidy of $2 million to CHG customers over the first three years of the program, an amount that could grow in grow in coming years.

Her comments reflect increasing hostility to ratepayer subsidies that are targeted to promote alternatives to traditional energy programs, particularly solar where business groups have complained of the high cost of those initiatives have imposed on commercial interests.

Jerome May, director of the Division of Energy for BPU, noted, however, that there would be no immediate impact on rates for customers, with the expected cost amounting eventually to one-third of a 1 percent increase, That amounts to about $3.50 annually, according to the utility.

BPU President Bob Hanna also defended the pilot program. "There may be a time where CNG is a competitive service," he said. "We're not there yet."

The state's Energy Master Plan suggested natural gas could readily be used to fuel fleets of waste haulers, package and beverage delivery vehicles, and other fleets operating in a small radius around businesses.

The proposal approved by the BPU is a scaled-down version of a filing submitted by the utility a year ago, calling for a $15 million program to build refueling stations in its territory.

With the approval by BPU, beginning immediately, the utility will work to identify companies in Monmouth, Ocean and Morris counties that currently use or plan to use natural gas vehicles in their fleet operations, such as waste hauling, buses and delivery trucks, to host the refueling operations.

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