Gerdau Steel is getting a discount beginning tomorrow on its energy bill, savings that could help the Sayreville steel plant stay competitive with rivals.
The state Board of Public Utilities has granted the only active steelmaker in New Jersey a 50 percent reduction of a surcharge on its energy costs, which amounts to about $1.5 million annually, according to Gerdau.
The levy, dubbed the societal benefit charge, is used to fund a variety of programs, including clean-energy initiatives, a low-income energy assistance effort, the cost of nuclear decommissioning, and cleanup of former manufactured-gas sites. The surcharge has been imposed on customers since the state broke up gas and electric monopolies. It falls most heavily on businesses that use a lot of energy.
For Gerdau, which employs more than 200 people at its plant in Sayreville, the SBC has cost the company more than $20 million since it was first imposed in 1999. The facility, the only remaining operational steel mill in New Jersey, is the largest recycler of any products in the state. It uses recycled scrap steel, instead of iron ore, as its raw material.
In making its case before the regulatory agency, Gerdau noted it was forced to close its Perth Amboy plant in 2009 due to operational costs, including, in part, the high cost of energy.
In the settlement with the agency, the discount will only apply to the electric portion of its bill with Jersey Central Power & Light. Beginning May 1, the surcharge will only apply to the component of the SBC charge linked to the New Jersey Clean Energy Fund.
The clean-energy fund is the largest component of the SBC charge, raising approximately $322 million a year. The fund has been a source of friction for the past eight years, largely because the former Christie administration routinely diverted money from it to balance the annual state budget, a practice the new Murphy administration also has employed. Well in excess of $1 billion has been diverted by the administrations, a tactic approved by the Democratic-controlled Legislature.
The New Jersey Division of Rate Counsel objected to the proposed reduction in the SBC on several ground, including arguing it is contrary to the enabling statute, which established it as a charge that cannot be bypassed and is to imposed on all ratepayers.
“It is important to remember that any reduction in the applicable SBC charge would saddle other ratepayers with an increase in the SBC charge to compensate for the loss of SBC revenues attributable to Gerdau,’’ rate counsel argued in its filing on the case.