NJ Firms Can Use Surcharge for Energy Efficiency Projects

Tom Johnson | December 20, 2012 | Energy & Environment
Legislation allowing use of SBC credits could drain funds available for state projects

Beginning next year, commercial and industrial businesses will have the chance to use part of a special surcharge on their gas and electric bills to help pay for energy-efficiency projects.

The program, approved yesterday by the New Jersey Board of Public Utilities, could have big implications for a wide variety of projects, including low-income energy assistance programs, cleanup of contaminated gasification plants, and efforts to offset uncollected bills from utility customers.

It also could affect the state’s ability to fund clean-energy programs, which are predominantly financed by the surcharge, also known as the societal benefits charge. Forty-four percent of the money raised by the SBC goes to finance the state’s clean-energy programs, funding both renewable-energy projects and energy-efficiency projects.

The surcharge has been widely criticized by business interests, who complained that while they pay the bulk of the money that goes into the clean-energy fund, its yield far fewer benefits to them than to other electricity customers.

The complaints resonated with lawmakers who approved a bill (A-2528), which allows commercial and industrial utility customers to establish a credit against their SBC surcharges and use that credit to invest in their own energy-efficiency projects.

The program approved yesterday by the BPU yesterday during its monthly meeting in the Statehouse annex seeks to implement those goals, although some industry observers question how well it will work. According to some industry lawyers, if their clients participate in the new program, it might lead to them being excluded from other clean-energy programs, which offer their clients far more financial benefits.

“Other programs provide much more generous benefits,’’ said Steven Goldenberg, a lawyer who represents the Large Energy Users Coalition, an organization representing big manufacturers, such as pharmaceutical companies and chemical facilities, that use large amounts of both electricity and gas.
“I doubt any of my members will elect to participate,’’ Goldenberg said.

In a series of meetings and hearings on the proposal, the BPU’s Office of Clean Energy sought to address concerns raised by utilities, consumer advocates, and others.

Its most important change was probably that it reduces from 100 percent to 50 percent the amount of credit that commercial/industrial customers (which also includes governmental entities and nonprofit groups) could establish on their SBC payments.

“This is a logical, in my mind, a logical compromise on this question,’’ said BPU Commissioner Joseph Fiordaliso, referring to the decision to give commercial and industrial customers a credit of not more than 50 percent on their SBC payments.

The move also had been suggested by the New Jersey Division of Rate Counsel, which feared the 100 percent credit would have an impact on other worthwhile programs financed by the SBC.

Given the large number of commercial and industrial customers — approximately 450,000 according to state statistics — the big pot of money raised by the SBC surcharges could be reduced significantly if a large number of those customers take advantage of the credit program.

Michael Winka, director of the BPU Office of Clean Energy, said the state is not planning to increase SBC rates to make up for any shortfall in funds created by the new credit program. Winka said he did not know how many of those customers will apply for the credit, but noted between, 3,000 and 4,000 apply for energy-efficiency rebates each year from the state.

The impact of the surcharges on residential customers’ bills currently runs about $22 per bill. The cost is about $4,300 annually for mid-sized commercial and industrial customers and at least $11,770 annually for for larger commercial industrial outfits.

In the revamped proposal submitted to the board, the staff also modified energy- reduction targets that would have to be achieved by companies seeking to obtain credits for energy-efficiency projects. The move was spurred by criticism from some larger companies, which suggested they already have achieved significant energy savings by grabbing the so-called “low fruits from the tree” to reduce energy use.

In adopting the program, the BPU also directed the staff to begin work on formal rules for the program and to “flesh out’’ suggestions from stakeholders for improving the process.