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Despite Deregulated Power Sector, NJ Consumers Stick to Utilities

Assembly panel votes out bill that would make it easier for third-party suppliers to pick up new customers

Assemblyman Upendra Chivakula (D-Somerset).
Assemblyman Upendra Chivukula (D-Somerset).

It has been 15 years since New Jersey broke up its electric monopolies and ushered in a new era in which consumers could shop for cheaper power for their homes and businesses in a more competitive energy marketplace.

To some, that goal has yet to be realized.

As of this past October, only 19 percent of the electricity serving residential customers was provided by power suppliers not affiliated with traditional utilities. It is far less than the number of residential customers who have switched in neighboring states, such as New York and Pennsylvania, where 37 percent to 50 percent of homeowners have made the move.

To retail energy marketers -- the ones providing electricity often at rates cheaper than traditional utilities charge -- New Jersey's low percentage is a signal that changes need to be made to the regulatory system set up under the state’s deregulation law.

If that is going to happen, it probably will require legislative action, which occurred yesterday when an Assembly committee voted out a bill (A-4552) aimed at promoting more competition in the marketplace, a move long sought by retail energy marketers, also known as third-party suppliers.

The issue could be important mainly to residential customers and small businesses, many of whom have yet to reap the benefits of energy deregulation and a competitive marketplace, which advocates say would lower bills in a state with some of the highest electric costs in the nation.

There’s no chance the bill will be enacted by the end of the lame duck legislative session, which concludes Monday, but proponents see the measure as jump-starting efforts to revamp a stalled regulatory system that hasn't promoted a more competitive marketplace for electricity.

“We see this as the beginning of a conversation,’’ said Jay Kooper, New Jersey state chair of the Retail Energy Supply Association, a trade organization representing 21 businesses trying to sell electricity to both commercial and residential customers in New Jersey.

The bill, voted out by the committee yesterday and sponsored by Assemblyman Upendra Chivukula (D-Somerset), the chairman of the panel, incorporates many changes in the regulatory system that the association has long, but unsuccessfully advocated to the New Jersey Board of Public Utilities, which oversees the process.

Most of the changes reflect arcane rules governing how the state’s four electric utilities go about buying power for customers -- mostly residential and small commercial ratepayers -- who do not bother to switch electric suppliers.

Under the current auction system, the state’s utilities buy one-third of the power they need to supply residential and some smaller commercial customers at a fixed price. The other two-thirds of electricity they need is purchased under contracts in the prior two years. The system helps avert big rate spikes when the price of natural gas climbs sharply, but prevents customers from receiving benefits when the opposite happens, which has been a trend in the past few years.

That system, Kooper argued, creates a “boom and bust’’ cycle that allows retail energy marketers to compete when natural gas prices drop, but are shut out of the market when prices rise—unable to undercut the prices offered by the utilities.

To remedy that problem, the bill would change the so-called fixed price system to only one year. It also would lower the threshold for commercial customers who would have to move to an hourly priced system -- a step that could afford those ratepayers an opportunity to achieve even greater savings on energy bills if they are smart about managing their energy use.

But the BPU and New Jersey Division of Rate Counsel have long opposed such a move, saying smaller businesses could be exposed to much higher bills if they do not have the expertise to manage energy costs when prices spike -- as they did during the recent cold snap -- and at other times of high energy demand.

The bill also would require the BPU to set up a simplified database on a website, giving consumers an easier way to compare different prices posted by electricity suppliers.

To Chivukula , the bill’s sponsor, such changes are needed to promote competition in the energy sector, an issue he argued is now only being pushed by Democrats in the Legislature. “The Christie administration and the BPU are practically doing nothing,’’ he said.

The New Jersey Utilities Association, a trade group representing the state’s gas and electric companies, and the New Jersey Business and Industry Association, both opposed the bill

Thomas Churchelow, director of government and public affairs for the NJUA, told the committee there is no evidence that the changes proposed in the bill -- long opposed by the BPU and the New Jersey Division of Rate Counsel -- will improve the stability in the marketplace.

That elicited a sharp response from Chivukula. “Why would you think everything is hunk-dory?’’ he asked. “Neither the BPU nor the Rate Counsel have ensured there is retail energy competition.’’

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