Utility Wants to Crank Up Investment in Distribution System

Tom Johnson | July 26, 2012 | Energy & Environment
Dozens of customers show up at BPU to protest small boost in bills caused by upgrade

South Jersey Gas is back before state regulators, seeking to accelerate its investments in its gas distribution system.

In a filing with the New Jersey Board of Public Utilities this week, the Folsolm-based gas utility is seeking approval to spend approximately $250 million over the next five years, above and beyond what it normally spends to keep its system reliable and safe.

The filing comes just two months after the state agency approved an increase in rates for the utility’s 356,000 customers that would boost their bills by about $10 a year. While only a modest rise, the increase spurred an unusual amount of protest from the utility’s customers, dozens of whom showed up at two regular BPU meetings to argue against the proposal.

It is an indication of how seriously the state’s four gas utilities are taking a recommendation in the Energy Master Plan adopted by the Christie administration to promote aggressive modernization of their gas systems. The goal aims to take advantage of cheap natural gas supplies linked to new reserves found in neighboring Pennsylvania and New York.

In March, New Jersey Natural Gas filed a petition with the BPU to replace cast iron and steel distribution lines under a five-year $204 million capital investment program. The pipelines, the most commonly used prior to 1970, are more susceptible to corrosion and leaks, according to the utility.

Neither South Jersey Gas nor NJNG’s proposals would have significant impacts on ratepayers.

In South Jersey ‘s case, the program is expected to result in an increase of 0.7 percent to the average residential customers’ monthly bill, beginning in October 2013. That translates into 96 cents a month.

Under the filing by New Jersey Natural Gas, there would be no immediate impact on customer rates although the utility would seek to recover costs in each year.

Given the steep drop in natural gas prices, utility officials argue customers would probably not even notice the increase. In the past two years, the utility’s customers have seen a series of reductions in costs from decreasing natural gas prices, including a 10.6 percent reduction in 2010 and 3.4 percent reduction in 2011.

In addition, South Jersey Gas issued bill credits in April 2011 for $23 million and $20 million in December 2011, a pattern repeated by other gas utilities because of falling natural gas prices.

“In all, customer bills in 2011 were lower than they were in 2001,” said Jeffrey DuBois, president of South Jersey Gas. “The program proposed in this petition serves as a natural extension of that program and we look forward to continuing our work with the NJBPU and the Division of Rate Counsel to further advance our system’s safety and reliability.”

The stepped up capital investment in the utility’s infrastructure is a program begun by the former Corzine administration as a way to provide an economic stimulus and create jobs when the economy is in recession.

“I think it is a smart thing to do,” said BPU Commissioner Jeanne Fox at the agency’s meeting in May when it approved the previous increase for South Jersey Gas.

Meanwhile, Public Service Electric & Gas is expected to file a petition with the BPU seeking to recover its costs for upgrading its infrastructure more quickly. In May, the state agency approved such a mechanism for investor-owned water utilities. The state’s gas utilities are pressing the agency to adopt a similar mechanism for the gas sector.