Three affiliates of the Public Service Enterprise Group are accused of manipulating the wholesale electricity market, a practice that discriminated against competitors and resulted in higher prices for consumers, according to a complaint filed with the Federal Energy Regulatory Commission.
The complaint, filed last month, revives an issue that arose during a rate case involving Public Service Electric & Gas earlier this year: charges that the gas utility offered preferential treatment to its affiliate PSEG Power on a gas contract to fuel the latter’s natural gas-fired generating stations. The gas supplied to the power generator was one-third the cost that rivals had to pay, according to the plaintiff, the Morris Energy Group.
The New Jersey Board of Public Utilities never addressed the dispute, saying it was out of its jurisdiction because it involved the wholesale marketplace. During the case, Morris Energy, which operates four co-generation plants in the state, argued the discriminatory pricing led to its own generating stations running less frequently at the expense of older, less efficient and more polluting plants owned by PSEG Power.
Higher Wholesale Electricity Prices
By charging higher rates to non-affiliated generators, the complaint contends it resulted in higher wholesale electricity prices in the PJM Interconnection region, the power grid serving more than 50 million people stretching from the eastern seaboard to the Midwest.
In its complaint, Morris Energy Group asks the commission to eliminate the preferential rate afforded PSEG Power or make gas available to competitors at the same rates. It also noted the commission has the authority to order refunds or to order the company to disgorge profits. The complaint also asks the commission to withdraw the authority for PSEG Power to set market-based rates, perhaps the most significant issue facing the company, according to some industry observers.
Losing Market-Based Rate Authority
If PSEG Power were to lose market-based rate authority, it would have to charge cost-based rates established by FERC, which likely would be lower than what it had been charging, said Stephen Goldenberg, an attorney who participated in the PSE&G rate case.
“The loss of market-based rate authority would be quite significant for PSEG,” Goldenberg said. “It is something that you look to have if you are a power producer.”
Paul Patterson, an energy analyst with Glenrock Associates, however, downplayed the significance of the complaint. “It’s not that surprising. They haven’t been successful in other forums. Why didn’t they go to FERC earlier?’’ he asked. “Whether anything becomes of this remains an open question.”
Preparing A Response
Michael Jennings, a spokesman for PSEG Power, said the company is reviewing the complaint and preparing a “thoughtful response.”
The complaint cited PSEG Power, PSEG Fossil, an affiliate that runs plants fired by coal and natural gas, and PSEG Energy Resources and Trade LLC, which supplies financial assistance to the sister companies.
The complaint fails to address another key issue in the BPU rate case—the fact that PSEG Power has never paid the decade-old societal benefits charge, which virtually all other gas and electric customers in New Jersey do. The fee, which primarily finances clean energy and low-income energy assistance programs raised $740 million in 2009.
The issue about non-payment of the charge was raised by Morris Energy in the rate case, apparently stemming from the original gas agreement struck back in 1995. That issue, too, was not resolved in the rate case with the state agency deciding to hold another investigation into whether PSEG Power and other companies should be allowed to bypass paying the charge. That proceeding has yet to get underway.