BPU Breaks Down the Charges in Electric Bills

Assessment identifies the lesser known costs comprising a typical customer’s rate

Every time you turn on your lights, a portion of the price of doing so will go to decommissioning a nuclear power plant. Or it might defray the cost to a utility of a payment that can’t be collected. It could also help elderly and disabled residents pay their utility bills.

In 2009, the average New Jersey homeowner was charged 16.74 cents for each kilowatt of electricity used, among the highest rates in the nation. The largest portion of a rate covers the cost of generating the power (5.886 cents per kwH) and transmitting it to your local utility (3.911), which delivers the power to your home (3.323 cents).

In an effort to shed more light on the costs that make up your electric bill, the New Jersey Board of Public Utilities (BPU) and Rutgers University’s Center for Energy, Economic, and Environmental Policy have developed a breakdown of a typical resident’s bill, identifying the wide array of programs funded by mostly unknown charges.

Their findings have surprised some, especially the revelation that more than 25 percent of the bill is driven by various state programs and policies, a number BPU president Lee Solomon found striking.

“It’s still 25 percent of your bill,” says Hal Bozarth, executive director of the Chemistry Industry Council of New Jersey. “If you use a lot of energy, like my members do, you get whacked.”

Nuclear decommissioning costs, uncollectible bills, energy assistance programs to low-income and elderly people are among nine separate programs financed by the societal benefits charge (SBC), which accounts for a bit more than half a cent (0.650 ) per kilowatt. These include the state’s clean energy program, cleaning up coal-gas manufacturing sites, and programs to reduce energy consumption at times of peak demand.

For the first time, the state broke down the cost of a controversial initiative implemented by PJM Interconnection, the independent operator of the regional power grid, designed to enhance reliability of the system to residential customers.

The charge, dubbed the Reliability Pricing Modeling, accounts for 1.337 cents of the generation costs. It is expected to cost New Jersey consumers more than $5 billion over the next five years, one of the reasons the state’s energy costs are so steep.

The breakdown also shows customers still pay about four-fifths of one cent (.793) to deal with costs associated with the breakup of the electric monopolies in New Jersey. In addition, ratepayers also are coughing up more than a half-cent (.604) to cover the costs associated with the requirement more than a decade ago that utilities pay higher than market costs for electricity from cogeneration plants, which were more expensive at the time.

The cost assessment is expected to play a pivotal role in the Christie administration’s review of the New Jersey Energy Master Plan as it decides whether to back aggressive goals to increase dramatically the use of renewable energy, particularly solar. Various groups are pressing to ease some of those goals, saying they will drive up energy costs in the state, making it difficult to attract and retain businesses.

Tom Pagliuco, a member of the New Jersey Large Energy Users Coalition, says he has done projections showing that solar costs, assuming the price of solar energy renewable certificates retain their present value, could account for up to 4 percent of an energy bill by 2016 if the state retains its aggressive solar targets.

The draft cost assessment, however, noted that the cost breakdown only includes the cost of various policies, and not their benefits. Solar energy advocates say the technology has numerous benefits, which are not usually included in cost assessments, including shaving the price of electricity during times of peak demand, reducing greenhouse gas emissions and other pollution, and creating new local jobs.