Utility Should Not Have Been Exempted From Fee, Says OLS

Opinion on PSEG Power contends that ‘all’ gas and electric customers are subject to SBC

Sen. Bob Smith (D-Middlesex), chairman of the Senate Environment and Energy Committee.
The state should not have allowed PSEG Power to avoid paying a surcharge on gas it purchased from an affiliate, an action which critics argue saved the independent power supplier hundreds of millions of dollars over most of the last decade, according to a legal opinion from the New Jersey Office of Legislative Services.

The opinion, requested by Sen. Robert Smith (D-Middlesex), deals with an issue arising out of a rate case involving Public Service Electric & Gas during which it was disclosed that PSEG Power had not paid a societal benefits charge (SBC) on gas it purchased from the Newark utility since the state deregulated the energy industry in 1999.

The surcharge, amounting to about 3 percent of a residential utility bill, but much higher for large manufacturers and heavy users of energy, has raised more than $4 billion since it was enacted. It finances low-income energy assistance programs, clean energy and energy-efficiency projects; the cleanup of contaminated coal gasification plants; and the costs of decommissioning nuclear power plants.

$300 Million in SBC Funds

PSE&G has received more than $300 million in SBC funds to deal with problems at coal gasification plants it once ran and to cover nuclear decommissioning costs, according to figures provided by the utility to the state Board of Public Utilities.

The disclosure outraged Ev Liebman, director of program advocacy for New Jersey Citizen Action. “Public Service is expecting everyone else to pay its bills so it can pile more money into profits for its executives and shareholders,” Liebman said. “It’s just not fair.”

In the seven-page opinion, written by Thomas Churchelow, associate counsel, the office concluded the energy deregulation law, known as Electric Discount and Energy Competition Act, “provides that ‘all’ customers of an electric or gas public utility are subject to an SBC.” However, he also said it appears the board is authorized to allow different energy customers different SBC rates.

Karen Johnson, a spokeswoman for the utility, said the company has received the OLS opinion and is reviewing it. PSE&G welcomes any review of the issue by the BPU, she added.

Smith, who asked the state attorney general to investigate the nonpayment of SBC charges after the issue was disclosed by NJ Spotlight last month, said he has forwarded the OLS opinion to the attorney general’s office, the BPU, PSE&G and others.

“If the state is going to take action, it’s up to the attorney general to decide,” Smith said. “The question is: Have we been following the law?”

Paying Its Fair Share

Steven Goldenberg, an attorney for the New Jersey Large Energy Users Coalition, said the OLS opinion confirms what his clients have been arguing in the rate case all along: that PSEG Power should be paying its fair share of SBC and held to account on other issues raised during the hearings. Besides the SBC charge, PSEG Power is not paying a fee paid by other customers aimed at combating global warming, nor is it paying surcharges related to infrastructure projects undertaken by the utility to create jobs last year.

Dave Pringle, campaign director for New Jersey Environmental Federation, said it is time for PSEG to pay up. “It’s the right thing to do legally, environmentally and given the state’s dire fiscal situation,” he said.

In an administrative law court decision on the rate case, the judge recommended that the BPU conduct a generic proceeding into discounted rates PSEG Power receives on the gas it and others purchase from the utility, and into the nonpayment of the SBC and other charges. The state agency may act on that recommendation at its bi-monthly meeting next Friday in Trenton.

Although PSEG Power has failed to pay any of the surcharges, it has benefitted to a much larger extent than other utilities from the SBC fund. According to the BPU, PSE&G received a total of $219 million in SBC funds for cleanup of contaminated coal gasification sites and another $106 million for decommissioning costs of nuclear power plants.

In comparison, New Jersey Natural Gas collected $196 million for cleanups of coal gasification sites, while Jersey Central Power & Light received $2.6 million.
“On its face, it’s ludicrous,” said Hal Bozarth, executive director of the New Jersey Chemistry Industry Council. “So the citizens of New Jersey are paying to clean up the monopoly’s pollution. Whatever happened to the saw ‘the polluter pays’?”

PSE&G’s Johnson said the company has 39 gas manufacturing sites, which it is cleaning up with oversight by BPU and the state Department of Environmental Protection. The sites were facilities where coal was converted into gas for street lights and heating purposes. Some of the sites were from PSE&G’s predecessor companies; others were runs by municipalities and others in the private sector, Johnson said.

The state many years ago decided the best way to deal with these properties was to have utilities resolve problems in each of their franchise territories, she said. PSE&G stopped collecting SBC funds for nuclear decommissioning costs in 2003, Johnson said. The responsibility now rests with PSEG Power, she said.

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