Who Pays the SBC?

The Board of Public Utilities is looking into exempting certain companies from paying the societal benefits charge and other surcharges

At times this year, SBC nearly became a four-letter word.

The acronym stands for societal benefits charge, a surcharge attached to gas and electric bills that raised $740 million from utility customers this past year. The pot of money was used to fund solar and wind projects, to help low-income households pay electric and gas bills and for a range of other purposes that policymakers deem worthy. Even Gov. Chris Christie tapped the fund to balance the state budget.

Others, particularly big businesses and institutions that use a lot of energy to thrive, view the surcharge a lot less charitably. In their cases, the surcharge can top more than a million dollars annually, crippling their profits and budgets and making them less competitive.

So it was hardly a surprise that there was a big outcry when it was revealed during a routine rate proceeding that PSEG Power, one of the largest and most profitable power producers in the region, had never paid the surcharge on the gas it uses to run some of its power plants. Rivals howled it put them at a competitive disadvantage. One estimate projected PSEG avoided $47 million in surcharges in the past year alone.

The criticism only increased when it also was revealed that the gas used by PSEG Power plants came at a discounted rate, with the supplier paying one-third the cost of what four co-generation plants were paying for the same gas from its affiliate, Public Service Electric & Gas.

Unresolved Issues

The issues were not resolved in the rate proceeding, leaving the dispute to be ironed out by the state Board of Public Utilities (BPU), which is conducting stakeholder meetings with the state’s four gas utilities, big energy users, and power suppliers. The issue is important to ratepayers because if other suppliers are granted similar perks, that will leave residential and small business customers paying more for gas and shouldering a bigger burden for funding of various surcharges, not just the SBC.

Steven Goldenberg, an attorney representing large energy users, argued it would lead to increased ratepayer subsidies, such as the pending request by power producers for an exemption from paying the SBC. If so, it would have 60 percent of the gas ratepayers paying 100 percent of the SBC program, Goldenberg argued.

It turns out “dozens” of other gas users probably have either discounted gas rates or do not pay the various surcharges most ratepayers pay, at least by the estimate of Jerome May, director of the Division of Energy at the BPU.

The questions before the board revolve around whether those discounted rates should be continued, whether to allow certain customers to avoid paying the SBC and other surcharges, such as a fee imposed to combat greenhouse gases, and whether power suppliers should have to pay those fees. If not, then what standards and criteria should be established before allowing such waivers?

May noted the issues were key to the rate case proceeding involving PSE&G earlier this year. “What do you mean they’re not paying the SBC?” May recounted. “Who the hell allowed them that? No one came up with great answers. What came out of that is we need some standardization.”

Tamara Linde, an attorney for PSE&G, disagreed. “I thought we had a very good answer,” she said. “We had approval of the board.”

Whether the board allows similar cases in the future remains to be seen. The agency is asking interested parties to submit comments on the issues early next year and will decide probably then whether to establish a rulemaking procedure.

Whatever the agency decides, it appears likely it will not require changes in existing contracts. Linde noted Commissioner Joseph Fiordaliso said at the beginning of the proceedings this only covers prospective contracts, not existing contracts.

No one at the two-hour hearing in BPU’s Newark office raised any concerns about the impact of the case on typical ratepayers.