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State Agency Holds Initial Public Hearing on $4 Billion PSE&G Rate Case

How much should resiliency cost, and who should bear the main burden of that expense?

BPU President Bob Hanna
Credit: Amanda Brown
BPU President Bob Hanna

It is a staggering $4 billion rate case, but there just might be consensus on one issue: The state’s utilities need to increase the amount they invest in their power grids to make them more resilient to extreme weather.

How much and just who is going to shoulder the bulk of that expense, however, remains to be seen. At least that seems evident from an initial public hearing on a plan by Public Service Electric & Gas to spend $2.6 billion over the next five years and another $1.3 billion over the rest of the decade.

The case, pending before the New Jersey Board of Public Utilities, is likely to set a precedent as to how much the state’s other electric and gas utilities invest to prevent widespread and lengthy outages from storms like Hurricane Sandy. Those events will be part of the new normal in the future, according to most officials.

The case poses a delicate balancing act for the state agency. How should it order utilities to implement measures to prevent the more than week-long outages customers suffered during Sandy without driving up energy bills, already among the highest in the nation?

Indeed, the impact that the ambitious investment program by PSE&G will have on utility bills remains very much in dispute.

Vaughn McKoy, an attorney for PSE&G, called the program, dubbed Energy Strong by the utility, a “prudent, timely and forward-looking investment’’ in hardening its infrastructure. At most, in the later years of the program, it would boost gas and electric bills by about 5 percent, McKoy said.

New Jersey Division of Rate Counsel Stefanie Brand dismissed that view.

“Let there be no doubt about it,’’ Brand said at the first of six public hearings on the proposal at Essex County Community College. “There’s no way you are going to spend $4 billion without seeing an increase in rates. When you add these numbers together, it’s a significant increase.’’

PSE&G, however, said rates should remain relatively flat, thanks to low natural gas costs and the elimination of other surcharges on utility bills stemming from the deregulation of the energy industry nearly 15 years ago.

Others, including BPU President Bob Hanna, are skeptical. Janine Bauer, an attorney representing AARP, an intervenor in the case, noted Hanna said the proposal reflects an 8 percent or more rate increase.

“AARP believes that PSE&G owes its New Jersey customers answers to why the company needs more of our hard-earned money and why the rates we are paying now are not enough to support reliable service,’’ she said.

Brand also contested the utility’s argument that, if implemented, its strategy will have a significant impact on reducing power outages and restoring electricity and gas when service is interrupted. “For most people, if a storm like Sandy ever comes back, this program is not likely to put them in a better position,’’ she said.

Others disagreed, noting much of the money spent in the first five years of the program would be spent to protect and upgrade the more than 30 utility substations and switching stations flooded during Sandy. The result in each case led to at least tens of thousands of customers without power.

Thomas Bracken, president of the New Jersey State Chamber of Commerce, argued it is clear the state’s economy cannot survive, much less thrive without reliable energy.

“When presented with the tradeoff of having lower rates to avoid the energy infrastructure investments that can provide greater resiliency and reliability and minimize the likelihood and length of outages from severe storms, it is clear to the state chamber that what is in the best interests of its members to make the needed investments,’’ Bracken said.

Union members representing electrical workers and other contractors, who were among the several hundred of people who showed up at the hearing in Newark, echoed that view.

Bud Thoman, president and business manager of IBEW (International Brotherhood of Electrical Workers) Local 94, noted the widespread outages caused by Sandy ended up costing the state more than $7 billion in state gross domestic product.

“It seems like a simple choice to me,’’ he said. “We can continue the Band-Aid approach, or we can make the investment to better prepare for the next superstorm. Spending the money now to prevent us from losing another $7 billion in the future -- and creating jobs in the process -- just makes sense.’’

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