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Slimmed-Down "Energy Strong" Proposal Close to Winning Approval

At $1.2 billion, controversial grid-upgrade program is about half its original price

PSE&G Substation Westfield
Credit: (AP/Mel Evans)
PSE&G Substation Westfield delivers power to some 30,000 customers.

A tentative settlement to allow Public Service Electric & Gas to spend more than $1.2 billion to harden its gas and electric infrastructure is very close to winning approval from state regulators and even from critics of its "Energy Strong" plan.

The proposed agreement is a bit above the $1 billion program suggested by the BPU in February.

The proposal, the subject of intense negotiations among most parties in the case over the past few days, would reach an agreement on the Newark utility’s initial petition to spend $2.6 billion over the next five years to prevent widespread outages like those that occurred during Hurricane Sandy.

Although some details need to be worked out, people familiar with the settlement said it could be wrapped up in the next few days, possibly as early as today. The proposed settlement would still have to be by approved by the New Jersey Board of Public Utilities, the state agency that oversees utility expenditures.

The proposal is viewed as an important signal as to how far the state is willing to go to increase utility bills to prevent power outages that left much of the state without service during the superstorm in October 2012, many for a week or more.

PSE&G’S proposal is the biggest and most expansive effort by a utility to deal with those concerns -- raising substations to prevent them from being submerged in future storms and taking other precautionary measures such as burying power lines.

The tentative settlement would allow the utility to spend $1 billion and recover those costs as they are spent from ratepayers, according to sources familiar with the agreement. It also would allow an additional $220 million in expenditures, which the utility could recover in a traditional rate case, they said.

PSE&G has said that the investments in improving the reliability of its gas and electric systems would have marginal impact on customer rates, largely because of the steep drop in natural gas prices and the elimination of surcharges on ratepayers’ bills stemming from the deregulation of the energy sector back in 1999. Its proposal is backed by many business groups, as well as more than 100 municipalities who view preventing widespread outages as a top priority of both businesses and residents.

Others, including the state Ratepayer Counsel and major users of energy, have questioned the extent of the company’s proposed expenditures, doubting the utility’s assertion it would not have a big impact on customers’ bills. In its briefs filed in the case, the office argued that the project should be denied or greatly scaled back.

PSE&G declined comment on the proposed settlement.

Paul Patterson, an energy analyst with Glenrock Associates in New York City, said if there is a settlement, it is a win-win situation for everybody.

“It will allow (PSE&G) to get some needed infrastructure projects underway in an effective way,’’ he said. “The last thing you want is to drag out this battle at the BPU.’’

Even critics of the filing conceded the state needs to take steps to improve the reliability of the power grid, but argued there was an overreach by the utility to spend money on projects that should be paid as part of the utility’s normal expenditures to maintain its gas and electric system.

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