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New Jersey Utility Customers Could Get Hit by Double Whammy

Tom Johnson | November 25, 2013

BPU prepares to hear two separate series of rate cases, one on recovering costs for restoring power, the other on hardening the grid

BPU Commissioner Mary-Anna Holden
BPU Commissioner Mary-Anna Holden

Talk about rate shock.

The state’s gas and electric utilities aim to recover nearly $1 billion in costs they incurred restoring power and service after extreme storms in the past few years, and the costs keep rising.

And that’s not all.

The cost to utility customers to harden the power grid dwarfs even that amount in filings by companies to the New Jersey Board of Utilities, with utilities seeking to spend in excess of $4 billion on projects to avert similar widespread outages as those that occurred during Sandy and other storms in recent years.

The agency is encouraging utilities to take steps to upgrade their electric and gas distribution systems in the wake of public outrage over losing power for two weeks or more during the superstorm. It poses a dilemma, however, for regulators: How much investment should be allowed at a time when many say utility bills already are too high in New Jersey?

Public Service Electric & Gas accounts for the bulk of those expenditures, seeking to invest $3.9 billion over the next 10 years, but other utilities also have sizable investment plans. New Jersey Natural Gas wants to spend $125 million upgrading its gas distribution system, while South Jersey Gas proposes to invest $280 million in its system, according to Jerome May, director of the Division of Energy at the BPU. Elizabethtown is seeking approval to spend $15 million on efforts to harden its system, May said.

Given the traditional nature of utility rate cases, it is unlikely that the seven utilities (PSE&G has both gas and electric operations) will be allowed to spend anywhere close to the total amount, especially in proceedings dealing with new investments that can be recovered from their customers. The regulatory agency typically shaves as much as one-half of the proposed investment plan in those rate cases.

Nevertheless, the filings could spike energy bills for customers in a state where business and consumer advocates have long complained that ratepayers pay among the highest electricity bills in the nation. The customers also face increased costs from efforts to promote cleaner ways of producing electricity, such as solar and wind.

“As former (Illinois) Sen. Everett Dirksen said, 'a billion dollars here and a billion dollars there, and soon you are talking about real money,'’’ said Jeff Tittel, a lobbyist for the New Jersey Sierra Club, which is opposed PSE&G’s so-called Energy Strong proposal.

Most of the cases stem from orders by the agency earlier this year to establish two separate generic proceedings: one to determine what the utilities should recover from expenses incurred during recent bad weather, and another to establish steps the utilities should take to prevent the kind of extensive and prolonged outages that occurred during Hurricane Sandy.

Each case involving a utility will be heard by an individual commissioner over the next year. The assignment of presiding officers in the cases appears to reflect speculation of how the BPU may change dramatically in the coming year. Neither BPU President Bob Hanna nor Commissioner Jeanne Fox will oversee any of the cases most recently assigned by the agency..

Hanna, whose months-long nomination to the New Jersey Supreme Court by Gov. Chris Christie last year has stalled in a fight with the Democratic-controlled Legislature, is rumored to be leaving the agency to take a job in the private sector. Fox, a prominent Democrat whose husband is a well-regarded consultant for the party, is probably unlikely to be reappointed by the governor when her term ends early next year.

Instead, Commissioner Dianne Solomon is likely to be assigned as presiding officer in the case where NJNG is seeking to upgrade its gas distribution system, probably the most heavily by in Hurricane Sandy. Solomon also is expected to be named presiding officer in the South Jersey Gas rate case, as well as the NJNG recovery case seeking to recover storm outage costs.

BPU Commissioner Mary-Anna Holden is likely to be assigned to two cases -- the Elizabethtown Gas proposal to spend $15 million to improve its gas distribution system and a case involving Rockland Electric in which the utility is seeking to recover more than $25 million in recent storm recovery costs, according to May.

Finally, BPU Commissioner Joseph Fiordaliso is likely to be designated as hearing officer for PSE&G’s efforts to recoup $242 million in various storm recovery efforts, dating back to a blizzard in February 2010. He also is overseeing PSE&G’s Energy Strong case, in which the utility is seeking to invest $2.6 billion over the next five years to harden its grid.

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