Bills Would Block Diversion of Clean Energy Funds, Develop More Capacity

Tom Johnson | December 14, 2012
Creating a new Office of Clean Energy would add financial transparency, making it easier to follow the money

The Legislature is moving to exert its influence on the state’s energy policies by approving a pair of bills, one of which would stop hundreds of millions of dollars in ratepayer surcharges from being diverted to plug holes in the state budget.

The bills, approved yesterday by a vote split along partisan lines in the Assembly Telecommunications and Utilities Committee, aim to prop up clean energy programs promoted by the state Board of Public Utilities and address the need to develop new generation capacity in New Jersey.

Both issues have been top priorities of the Democratic-controlled Legislature and Republican administration. But in the face of huge budget gaps, both have approved diverting more than $600 million in ratepayer-financed surcharges in recent years.

“We are not doing justice to ratepayers,’’ said Assemblyman Upendra Chivukula (D-Somerset), the chairman of the committee, referring to the raiding of funds. His bill (A-2888) would codify a new Office of Clean Energy within the BPU, a move he argued would provide more transparency about where funds raised from ratepayers are dedicated and spent.

There already is an Office of Clean Energy within the BPU, but various clean energy programs are spread throughout state government, including the New Jersey Economic Development Authority and other agencies.

Jeff Tittel, director of the New Jersey Sierra Club, endorsed both bills. “It ought to be a one-stop shop,’’ he said, noting that the EDA now oversees some clean energy projects involving combined heat and power plants, which generate electricity and steam simultaneously. “Leaving one office to coordinate all these activities makes sense.’’

The other bill (A-2887) aims to direct the state’s Energy Master Plan to develop more generating capacity in New Jersey. The capacity problem emerged with the deregulation of the sector supplying electricity to homeowners and businesses more than a decade ago.

At the time, it was thought that deregulating the energy sector would create competition from newer and more efficient power plants, lowering electricity prices. For the most part, That failed to happen.

Instead, incumbent power suppliers benefitted from increasing capacity payments to ensure there is enough electricity to keep the lights on. In New Jersey, those costs run more than $1 billion a year, far more than what neighboring states pay, according to Chivukula.

“From a planning perspective, it is very much needed,’’ the lawmaker said, noting that since the state deregulated the energy industry, most of the power plants that have been built are peaking facilities, which only come online at times of peak power demand and tend to drive up electricity costs.

The need to look at capacity issues is also driven by the issue of whether New Jersey will face reliability problems in the next few years because it lacks generating capacity, according to Chivukula.

Under a bipartisan plan developed by the Christie administration and the Legislature, the state awarded ratepayer subsidies to a few power plants to address the problem, but that effort is being challenged in federal court by incumbent power suppliers.