Opinion: The BPU Needs to Sign Off on PSE&G’s $4B Upgrade Plan

R. William Potter | February 27, 2013 | Opinion
Pro-rated over its 10-year term, the utility's scheme costs consumers less than a quarter per day

A recent story posted to NJ Spotlight asked if it’s “time to invest nearly $4 billion in ratepayer subsidies to help modernize the power grid to avert widespread outages from extreme weather, such as hurricane Sandy?”

Your answer may depend on whether you believe that spending $4 billion to prevent blackouts is a “subsidy” for PSE&G’s benefit or an essential infrastructure “investment.”

“Subsidy” sounds negative to me, like a bailout of a failing industry with strong political connections. (My copy of Webster’s defines subsidy as a “gift or grant from government . . .”)

In contrast, “investment” sounds positive. It suggests foregoing pleasurable consumption now to ensure future needs are met. (Among Webster’s definitions is “to put money to use . . . for something offering profitable returns.”)

Regardless of whether you’re more comfortable with “subsidy” or “investment,” the PSE&G petition is a bold plan — subject to Board of Public Utilities’ approval — to spend up to $3.9 billion over 10 years on a menu of blackout prevention measures that builds on lessons learned from Hurricanes Irene and Sandy.

PSE&G’s plan comes not a moment too soon. The next hurricane season will be upon us in fewer than three months. Indeed, the utility’s scheme may already be too late to yield much benefit before the summer thunderstorms arrive to inundate us.

So what should the BPU do with PSE&G’s “Energy Strong” plan? It should approve it quickly, with the proviso that the agency has the right to reconsider specific features of the plan over its 10-year life.

Anyone who shivered in the dark for two weeks last October or searched in vain for a gas station that had electricity would gladly shell out $7.00 or 8.00 more each month, an initial estimate of the cost, if the increase is targeted to the hardening of PSE&G’s far-flung electric and gas infrastructure.

In other words — again, if early cost estimates hold up — for 24 cents a day or a penny an hour, millions of PSE&G customers get a kind of insurance against the blackouts that 90 percent of them endured during Superstorm Sandy.

To be sure, not every customer will pay only $7.00 to $8.00 more a month. Larger customers will pay more, as they should. Also, prioritizing PSE&G’s workload is a valid topic for the BPU to review, subject to the usual round of hearings and public participation.

As written, PSE&G ‘s decade-long strategy propose dozens of important initiatives. Each one sounds like a good idea awaiting rapid BPU approval, so the utility can get started energizing the economy as it implements its plan.

To highlight just a few issues in the petition:

  • Flood proofing dozens of switching and substations, including many that were under water during Sandy, thus shutting down service to thousands of customers;
  • Rewiring vast stretches of overhead power lines to carry more electric current and be more resilient against high winds;
  • Replacing or strengthening wood utility poles that can splinter in high winds;
  • Pruning thousands of trees threatening to take out power lines in a storm;
  • Stockpiling emergency generators to install at public facilities including gas stations when the next “super storm” hits; and
  • Installing high-tech communication systems to speed rapid-response and enhance coordination with municipal officials and the public.
  • There’s also a much-needed proposal to start the “targeted undergrounding” of especially vulnerable power lines, based in part on their history of falling during storms.

    In short, the PSE&G petition represents a welcome break from the conventional practice of “incrementalism,” waiting stoically for the next storm to determine what needs fixing.

    So, what’s not to like in PSE&G’s Energy Strong program?

    For starters, I wish it relied more on distributed generation, like cogeneration and solar systems. With some technical fixes, solar units can be isolated — or “islanded” — from the grid during a blackout, allowing energy to be safely fed into local homes or wherever the systems are sited.

    But that’s a relatively minor quibble, given PSE&G’s strategic support for solar development around the state, as reflected in the utility’s solar development petitions now pending at the BPU.

    The main outcry against the plan is the perennial one: “How much will it cost and who will pay?” Among prominent naysayers is the Ratepayer Advocate, quoted as saying “I don’t know how ratepayers can afford it.”

    Can’t afford it? A more enlightened reply that truly represents consumers is how can we afford not to do whatever is needed to protect the public against more superstorms, which climate scientists tell us are sure to slam New Jersey again and again, as global warming continues to punish us for carbon pollution.

    Importantly, literally every dollar PSE&G spends on its plan, assuming the BPU approves it, must be justified in annual “prudence reviews.” This means the utility uses its own capital first and then has to ask the BPU for recovery later — a strong incentive for it to avoid waste or extravagance.

    To paraphrase the late Prof. Alfred Kahn, considered the dean of regulatory economists during his long tenure at Cornell, a public utility is society’s chosen instrument for directing private capital to serve the public good.

    By that definition, the PSE&G petition looks like the gold standard.

    So, subject to the usual tweaking — spend a little more here, a little less there — it deserves prompt BPU approval, followed by expedited action to “modernize the power grid to avert widespread outages from extreme weather.”