State Agency Wants to Know Why Jersey Pays So Much for Power

BPU to probe operator of regional grid, power suppliers, transmission companies -- among others

New Jersey will press its investigation into why power prices are so steep for businesses and residents, with a top state official ordering a new hearing to explore what can be done to rectify the problem.

In an order issued early yesterday evening, the Board of Public Utilities (BPU) said issues raised during an earlier proceeding warranted continued investigation into practices of the operator of the regional power grid, the PJM Interconnection; power suppliers; and owners of transmission lines.

The latest probe is likely to ramp up pressure on the energy industry to find a way to build new power plants here, a step the Christie administration argues is the best way to reduce some of the highest electric bills in the country for consumers.

Its efforts to do so, however, have been frustrated by the Federal Energy Regulatory Commission (FERC), which updated its rules governing new power plants. These make it unlikely that the state will succeed in a plan to use ratepayer subsidies to ensure that three new power stations will be built. The ongoing dispute revolves around the arcane and complex procedures used to determine which power plants deliver electricity to consumers on any given day.

While it is not much of an issue on the political radar, the inability to attract new generation into the state has a big impact on consumers. Costs rise steeply because the power grid is so congested in the northern part of New Jersey. Residents and businesses end up paying more than $1 billion each year to ensure there is enough capacity to keep the lights on.

Special Tariff

The higher costs are blamed on a special tariff imposed by the PJM to maintain reliability of the grid, as well as supposedly incenting power suppliers to build new plants where they are needed. As the BPU’s order notes, however, few new big plants have been built in New Jersey where power prices are the highest, while some generating stations have come online in neighboring jurisdictions — even though prices there are much lower than what state residents pay.

In the previous hearing there also were complaints from power suppliers that extraordinary delays in winning interconnection approvals to the power grid from PJM was a major factor in why few new generating stations are being built.

In the order, signed by BPU President Lee Solomon, the state made it clear that the second hearing will range over a number of controversial issues, including whether some transmission companies are “causing intentional delays in the interconnection process to benefit market generation affiliates?”

It is a concern the state raised recently in a letter to PJM, asking the operator of the regional power grid to no longer allow incumbent transmission owners to play a crucial role in determining what new electric generating stations hook up to the grid.

Doing the Math

The BPU’s issues revolve around the policy of allowing transmission owners do the cost analysis of what it would take to let new power plants tie into the power grid. If they determine that the costs, most of which involve expensive upgrades to the grid, are very steep, it could discourage the development of new power generation, an outcome benefiting existing power suppliers in the region.

The investigation also will look into whether large power suppliers are hindering the development of new generation. Like the transmission interconnection issue, it could focus attention on Newark-based Public Service Enterprise Group (PSE&G), the owner of the state’s largest electric utility, and its unregulated affiliate, PSEG Power, one of the largest power suppliers in the region.

In the order, the agency also said it wanted to explore what are the “precise means by which incumbent generators with structural market power obstruct or could potentially obstruct the development of new capacity projects in these markets.”