PSE&G Withdraws Permits for Highlands Transmission Line

Rate increases likely as utility turns focus to construction of eastern end of project

Public Service Electric & Gas has withdrawn permits needed to construct a portion of its 45-mile long transmission line through the New Jersey Highlands, a decision that probably means higher electric bills for customers.

The transmission line, described by proponents as crucial to maintaining reliability of the regional power grid — particularly in parts of New Jersey — has been opposed by most environmental groups and many of the 16 communities through which it would pass.

In withdrawing freshwater wetlands and flood hazard permits needed for the project, the Newark utility, the state’s largest, said it would instead concentrate efforts on building an eastern segment of the line, which would run about 25 miles from switching stations in Roseland to Hopatcong, according to Karen Johnson, a spokeswoman for the utility.

Utility officials said this portion of the project has “independent utility” or value to electric customers in New Jersey, since it will connect with other transmission lines in the state and is needed to maintain reliability. The permit application for the remainder of the line in New Jersey will be made at a later date.

The permitting delays already are being cited as a factor in the boosting of prices paid to power suppliers to provide the capacity needed to ensure there is enough electricity capacity available in the Mid-Atlantic region. In an auction held on May 14, those prices rose by roughly $100 a megawatt hour compared with a year ago in a sale run by PJM Interconnection, the independent operator of the power grid.

PJM officials attributed the jump in prices to a projected growth in demand in the region and delays in the transmission line project, which is designed to ease congestion, a factor that boosts energy prices in areas that are constrained.

“All of those things were a factor,” said Paul Patterson, an energy analyst with Glenrock Associates in New York. “For PSE&G, it’s just a more constrained area. People were expecting a higher number for northern New Jersey.”

While Patterson said the higher prices might encourage more construction of new generating capacity and transmission, the PJM’s capacity auction is highly controversial, particularly in New Jersey, where state regulatory officials have challenged it. The auction is designed to encourage new generation by rewarding suppliers for retaining the capacity to maintain reliability, but the state’s energy master plan said it will cost New Jersey consumers $7 billion over the next few years, even before the May auction.

Andrew Ott, PJM’s senior vice president for markets, said in a statement that transmission line additions and upgrades would reduce capacity price differences, a prospect that could lower utility bills for state ratepayers in the long run.

PSE&G officials said they were pleased with the state’s decision to consider the eastern portion of the project at this time. “Pending the DEP’s review, we plan to start construction of this portion of the line this summer so that we may begin to address a number of the reliability violations expected to occur in June 2012,” said Ralph LaRossa, PSE&G president and chief operating officer.

The utility plans to apply for a new permit for the western portion of the project from Hopatcong west to the Delaware River and will cooperate with the National Park Service’s National Environmental Protection Action (NEPA) Environmental Impact Statement process, which is not expected to be completed until May 2012.

Environmentalists, however, said the utility could be withdrawing the permits on the western portion of the project because it might be more difficult to obtain approvals there. Instead, they might be trying to build political pressure to complete the line by building more than half of the system, according to Jeff Tittel, executive director of the New Jersey Sierra Club.

The line follows an existing power line for the entire 45-mile length and will pass through 16 municipalities: Andover Township, Boonton Township, Byram Township, East Hanover Township, Fredon Township, Hardwick Township, Hopatcong Borough, Jefferson Township, Kinnelon Borough, Montville Township, Newton Township, Parsippany-Troy Hills Township, Rockaway Township, Roseland Borough, Sparta Township and Stillwater Township.

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