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Assembly Panel Faults BPU for Failure of Deregulation

Competitive energy market has not emerged, keeping residential bills higher than necessary.

With the 15th anniversary of the state’s breakup of energy monopolies approaching, the chairman of the Assembly Telecommunications and Utilities Committee yesterday said it is time to reexamine the law to make the sector more competitive.

Assemblyman Upendra Chivukula (D-Somerset), the chairman of the panel, said the state needs to look at ways the law can be revamped to better serve New Jersey’s ratepayers, who could lower their utility bills with a more competitive market.

“We find that the passage of the law has not realized one of its most important objectives -- to spur retail competition,’’ said Chivukula, who made his announcement following a hearing last week before his committee on the competitive energy market. “The BPU [Board of Public Utilities] has failed,’’ he said.

Consumer advocates have long criticized the 1999 law for failing to deliver promised lower energy bills for residential customers, although larger industrial and commercial customers have benefitted.

With the recent steep drop in natural gas prices, however, retail energy suppliers have been able to offer lower prices to homeowners and small commercial customers, leading to a more robust competitive electricity market.

As of this past April, 16 percent of residential customers had switched from their incumbent utility to so-called third-party suppliers. That is up dramatically from just a few years ago, but falls far behind the number of customers switching in neighboring states, which also have deregulated the energy sector.

Retail energy suppliers have been lobbying the state BPU, which oversees the four electric utilities in New Jersey, to revamp some of its policies to make it easier for customers to switch providers and to convince ratepayers to shop for a different supplier.

Their efforts have resulted in a mixed bag. Last month, the BPU adopted new rules aimed at improving billing procedures when customers switch to a new power supplier. But both the BPU and the New Jersey Division of Rate Counsel have opposed efforts to expand the way in which many commercial customers shop for alternative energy suppliers.

“It’s not for us to substitute for them their business judgment,’’ said Stefanie Brand, director of the Division of Rate Counsel, adding those customers may shop for a different supplier if they choose, but it should not be mandated. Arguing that many small commercial customers may have too many other business-related concerns to be sophisticated about shopping for energy, Brand said “they may or may not save money.’’

While Chivukula expressed a preference to get more residential customers shopping for cheaper supplies, Brand said the issue is more complicated when it comes to households switching from their incumbent utility.

Her office gets more calls about complaints and questions about switching electricity suppliers than on any other issue, Brand said. “The most important thing is consumer education,’’ she stated.

A study in New York found that 84 percent of the upstate residential customers who switched ended up paying more for their electricity than if they had stayed with their incumbent utility, Brand said. The cost to consumers topped $100 million.

“It doesn’t necessarily apply to us,’’ Brand said “but we need to pay attention to this.’’

Jay Kooper, state chairman of the Retail Energy Suppliers Association, said revisiting the deregulation law is both “very timely and useful.’’ He argued the state should focus attention on the way electric utilities buy power for customers that do not choose to switch.

The process, melding electricity prices over a three-year period, creates a situation in which the prices a consumer pays for power are either artificially high or artificially low, he said. The result creates an unstable competitive market for retail energy suppliers, he added.

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