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PSE&G to File With Federal Agency, Bulk Up Gas and Power Grids

Tom Johnson | March 6, 2013

State's largest utility wants OK to invest $1.5 billion -- on top of billions it's asking BPU to sign off on.

Public Service Electric & Gas is looking to upgrade its system for delivering electricity to customers, saying it will ask a federal agency to approve $1.5 billion worth of new transmission projects.

In an annual investors’ conference call with Wall Street analysts held last week in New York, the state’s largest utility detailed that it will invest much of its capital in its gas and electric power grids. The strategy will drive most of the huge energy company’s profits over the next three years, rising to more than half of the parent company’s earnings. It will eclipse its unregulated power subsidiary, which only a few years ago accounted for more than 70 percent of the company’s bottom line.

The investments in the transmission grid come on top of other filings the utility has made to the New Jersey Board of Public Utilities, including a $3.9 billion spending plan filed last month to make its distribution system, which delivers electricity and gas to homeowners and businesses, more resilient in the wake of Hurricane Sandy. The utility also is seeking approval to spend $883 million to promote the development of solar systems in the state.

While some critics say PSE&G's plans will drive up costs to ratepayers, the utility argues that the expenditures align with both state and federal policies to modernize the power grid, promote cleaner ways of producing electricity, and make its power and gas distribution systems more resilient.

“The story looking ahead is our capital program to reinvent the grid, to a certain extent,’’ said Ralph Izzo, president, chief executive officer and chairman of PSEG, the parent of the utility.

That prospect, however, poses challenges for BPU officials, who are looking at ways to prevent widespread power outages in the wake of extreme weather. The problem is that doings so may increase customers’ energy bills in a state already saddled with some of the highest electric costs in the nation.

The utility’s customers will ultimately pay for all of those costs. PSE&G executives say electric bills will remain essentially flat, at least as far as the $3.9 billion spending program is concerned, because other surcharges customers have paid for the past 15 years (arising from the state’s move to deregulate the power sector) will no longer be collected in the next few years. Low natural gas prices also will keep electric and gas bills lower than in the past.

Some challenge that view. “In their world, there is never a rate decrease,’’ said Steven Goldberg, an attorney representing the trade group New Jersey Large Energy Users Coalition. “Anytime there is a little daylight when costs could drop for ratepayers, the utility finds creative new ways to hold costs captive.’’

PSE&G executives disagreed. “We try to align our interests with policymakers,’’ he said, whether that be at the state or federal levels. “It’s not going to be a tremendous impact on customers.’’

Regarding their proposal to seek another $1.5 million in transmission upgrades from the Federal Energy Regulatory Commission, Karen Johnson, a spokeswoman for the utility, said the projects do not involve any new transmission lines, but consist of hardening existing lines.

The transmission projects have come under increasing scrutiny from both consumer advocates and state regulators because FERC often awards the utility a higher rate of return than it would otherwise earn on more traditional projects.

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