PSE&G, AARP Trade Harsh Words Over Plan to Upgrade Grid

Tom Johnson | March 13, 2013 | Energy & Environment
Seniors' organization argues against financing improvements with new surcharges to customer's bills

Count the state chapter of AARP among those questioning the plan by Public Service Electric & Gas to spend close to $4 billion to modernize its electric power grid in the wake of Hurricane Sandy.

In an unusual tiff between a PSE&G executive and the president of the AARP chapter in New Jersey, the two organizations traded exchanges this week accusing each other of misrepresenting aspects of the utility’s proposal to invest in $3.9 billion over 10 years to make its infrastructure more resilient in the wake of extreme weather.

The dispute underscores the tough choices facing state regulators and utilities, both of which are under pressure from the public to avert widespread outages, that can leave some customers without any power for more than a week. How to do so without increasing electric bills, already among the highest in the nation, is the dilemma facing state officials.

The quarrel is a departure from the past when the two organizations enjoyed a relatively good working relationship. “Never happened before, not in my 12 years at AARP in New Jersey,’’ wrote Douglas Johnston, governmental affairs director for NJ AARP.

PSE&G contends its plan to invest billions in its distribution system will not raise rates, primarily because of two unique factors: historically low natural gas prices and the fact that a pair of surcharges on utility bills stemming from the deregulation of the electric industry will end in the next few years.

“We anticipate that the typical residential customer’s combined gas and electric bills will be lower in 2018 than in 2008, even after this necessary investment,’’ wrote Ralph LaRossa, president and chief operating officer of PSE&G, in a letter to David Mollen, president of the New Jersey chapter of AARP.

Noting the utility’s long and cordial relationship with AARP, LaRossa told Mollen he was disappointed the senior organization has communicated “inaccurate information’’ about the impact of the utility’s $3.9 billion program in a letter dated March 12.

Mollen wasted no time in firing back yesterday, calling the allegations “grossly incorrect.” He denied AARP had said the investment would “skyrocket’’ bills, while still questioning whether the benefits of the investment will exceed the costs to ratepayers.

“AARP opposes PSE&G’s request for a multibillion dollar rate hike that is established through a special clause or fee,’’ Mollen wrote LaRossa. He argued that any such investment ought to be considered in a base rate case, a stance echoed by the New Jersey Division of Rate Counsel in a brief filed by the office before the state Board of Public Utilities.

The tactic of paying for projects with surcharges on customers’ bills has been used more frequently by utilities in recent years, a strategy that avoids committing more of the company’s capital to those projects. That approach has added millions of dollars to ratepayers’ bills, according to the Division of Rate Counsel.

The utility’s proposal has won some support from the business community, including the New Jersey State Chamber of Commerce.

“Investing in a reliable and resilient energy infrastructure that is better able to withstand powerful and damaging storms like Sandy and other natural disasters will help keep New Jersey competitive and open for business,’’ said Thomas Bracken, president and chief executive officer of the chamber.

Critics of the PSE&G proposal, however, say consumers face other costs beyond those proposed by the state’s largest utility.

PSE&G has yet to file for expenses incurred by restoring power during Sandy. It also has a pending $885 million filing before the BPU to expand its solar program, and just recently announced plans to ask approval from the Federal Energy Regulatory Commission to spend $1.5 billion on its transmission system.

Other utilities will come in with other rate requests. Late last month, Jersey Central Power & Light amended its base rate increase to include costs related to Sandy, seeking a 5.1 percent increase to raise another $112 million from ratepayers.