Lock In Long-Term Power Contracts To Stabilize Prices?

Stefanie Brand, director of the Division Rate Counsel, suggests utilities extending purchasing agreements 10 years or beyond would mean more reasonable electric bills for customers

New Jersey ought to consider dramatic changes in the way it goes about purchasing the electricity its utilities need to supply customers, a step that might stabilize energy prices, according to Stefanie Brand, the director of the Division of Rate Counsel.

Brand, who is also acting Public Advocate, suggested to lawmakers that entering into long-term contracts of 10 years or more to buy power might lead to lower electric bills, while making it easier to invest in cleaner sources of energy, such as solar and wind power.

Brand’s comments came during a hearing of the Assembly Telecommunications and Utilities Committee in the Statehouse annex. The focus of the hearing was the status of the two-year-old energy master plan, a document Christie administration officials plan to re-examine over the next three months (see Fate of Energy Master Plan Latest Worry for Clean-Energy Advocates).

‘Mid-Course Correction’

That effort is viewed skeptically by clean energy advocates, who fear it could lead to a scaling back of aggressive goals to increase the use of renewables and promote energy efficiency. Joe Sullivan, ombudsman for the state Board of Public Utilities, told the committee the administration does intend to write a new plan, describing the work more as a “mid-course correction.”

But both he and Brand argued the state needs to take a look at the cost of implementing various recommendations in the plan. Keeping energy costs as reasonable as possible, they said, should be one of the plan’s priorities.

That view was endorsed by business lobbyists. Hal Bozarth, a lobbyist for the Chemistry Council of New Jersey, noted electric rates for industrial customers are the eighth highest in the nation; commercial rates, the sixth highest; and residential rates, the ninth highest.

Brand recommended changing the process by which the four electric utilities purchase the power they need to supply customers. Since 2003, the utilities buy one-third of the power they will need each year in an online auction. They combine that price with contracts purchased the previous two years to determine what the supply costs. Advocates of the approach argue it has averted huge spikes in utility bills, which have slammed ratepayers in other states due to the wildly fluctuating price of oil and natural gas.

Brand said the energy master plan should encourage modifications in the current auction system to ensure that consumers benefit from the appropriate balance between price stability and the lowest reasonable price.

“Locking in a portion of our purchases through long-term contracts that would encourage greater investment in new capacity, including potential in-state capacity that would create jobs and come with lower transmission cost than out-of-state facilities we rely on now,’’ she said.

With long-term power purchase agreements, developers will have the stable income they need to encourage investment in all types of generation by facilitating financing and reducing financing costs, Brand added.

Others, however, urged the committee to retain the aggressive targets set by the plan as well as ambitious goals for expanding solar power through legislation passed in the lame-duck session. Terry Sobolewski, a business development manager at SunPower, noted there already are more than 200 solar companies based in New Jersey, which have created 1,000 jobs.

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