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Utilities Eager to Get Paid for Restoring Power After Superstorm Sandy

Rate cases seek to recoup recovery costs, ramp up investments to harden infrastructure against extreme weather.

The bill may be coming due soon for electric customers to cover the expenses the utilities racked up restoring power to the more than 2 million of them left without lights in the wake of Hurricane Sandy.

This afternoon in Toms River, Jersey Central Power & Light begins public hearings on a rate case in which it seeks to recover $345 million of the $640 million the utility spent in the aftermath of the superstorm.

The case follows a public hearing this past Thursday in Hammonton on a separate rate case filed by Atlantic City Electric in which the utility seeks to recover the $16 million it spent in restoring power during Sandy and a devastating thunderstorm (aka a “derecho’’ storm) this past June. Overall, the utility is looking to spend $70 million in upgrades, which, if granted, would raise the typical residential customer’s bill by $12.69 a month.

Beyond recovering storm expenses, the state’s utilities also plan to make huge upgrades to their distribution systems to ensure that they are more resilient to extreme weather, which both utility executives and Christie administration officials concede will likely happen more frequently.

Public Service Electric & Gas has filed a petition with the New Jersey Board of Public Utilities seeking to spend $3.9 billion over the next decade to “harden’’ its system against future storms, although hearings on its proposal remain to be scheduled. The Newark utility has yet to file a case seeking to recover its Sandy-related expenses, but PSE&G executives have said the cost could run as much as $300 million.

The rate cases occur at a time when the general consensus is that the state needs to act now to upgrade its gas and electric utility infrastructure. This a strategy is motivated in part by historically low natural gas prices, which have lessened the impact of upgrades on utility customers.

For instance, JCP&L, whose storm-recovery efforts are part of a larger base-rate case, said the overall effect on its 1.1 million customers would be to raise prices by 4.5 percent for its typical residential customer, but would be offset by a 3 percent drop in costs to produce electricity. Even with the rate increase, JCP&L says the utility still will have the lowest residential rates among the state’s four electric distribution companies.

Paul Patterson, an energy analyst for Glenrock Associates in New York, said the spate of rate cases is not unusual, noting that “you are seeing it on the gas side as well.’’

The rate cases are primarily driven by the utilities’ new investments, whether it involves employing new technology or hardening the gas and electric grid by replacing old infrastructure, Patterson said. “This has been going on for some time now,’’ he said.

How quickly the rate cases will be decided is uncertain. At its most recent monthly meeting, the BPU set in motion two separate proceedings: one to determine how utilities should recover storm restoration costs and the other to determine what needs to be done to harden the power grid to prevent widespread outages in the future.

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