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PSEG Chief Counsels Bigger Investments in Developing Alternative Energy

But taking funds from conventional sources of income could threaten utility’s bottom line, grid reliability

ralph izzo

How vulnerable are utilities to the growing use of alternative energy?

That was the question posed to Ralph Izzo, the chief executive officer, president, and chairman of Public Service Enterprise Group, during the company’s annual shareholder meeting shareholder yesterday in Newark at the Robert Treat Hotel.

It is an issue that many utility companies are wrestling with as states are adopting tougher standards to rely on renewable energy to generate electricity, programs to reduce energy consumption, and initiatives to build smaller power plants to provide power to local businesses.

All of the forgoing end up reducing utilities’ traditional source of revenue by decreasing gas and electric consumption by customers, a threat to a company’s ability to maintain safe and reliable service to businesses and consumers.

In response, Izzo said the utility always has the opportunity to file a rate case to make sure it gets enough revenue to maintain the reliability of its power grid. He also defended the company’s investments in renewables and energy efficiency, saying it earns as much money on its investments as in traditional utility projects.

Public Service Electric & Gas, a subsidiary of the Newark-based company, has invested about $1 billion in both solar energy and energy-efficiency projects in recent years -- far more than any other utility in the state.

Izzo would like to invest more of the company’s money into energy efficiency, saying it should be a top priority of where utilities invest their capital. Last week, the state Board of Public Utilities approved a new $95 million energy-efficiency program proposed by PSE&G to help hospitals, multifamily units, and governments cut back their energy use and save money.

“Energy efficiency is a key to a sustainable future,’’ Izzo said in a speech to shareholders. “Our energy-efficiency programs, in which we have invested about $300 million, have been highly successful in helping customers reduce their energy bills.’’

In a later interview, Izzo said, “Why can’t we make energy efficiency first ahead after all else?’’

In the next five years, however, most of the company’s $13 billion investment program will be targeted at upgrades and other projects related to the utility’s transmission lines, which deliver electricity from power plants to the company’s substations and wires to most businesses and residential customers.

Eventually, Izzo said, investments in alternative energy projects will dry up as existing subsidies to promote such technologies as solar power end. Still, he said the big unresolved question is how the nation decides to adapt to climate change, which would have a big impact on today’s power plants.

It could lead to increased investments in renewable energy and energy efficiency, but also raises concerns about reliability of the power grid, according to Izzo. He has argued that the company should invest much more in energy efficiency -- up to $1billion -- a tough sell to regulators, even given the fact that most agree it is the best way to save consumers and businesses money on their energy bills.

In terms of the traditional power system, Izzo said the company plans to add another 130 megawatts of capacity to the Peach Bottom nuclear unit, which it partially owns. It also has installed new equipment to increase the efficiency of its gas-fired plant in Linden and another facility in Bergen County.

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