Some of State’s Most Powerful Lobbies Oppose PSE&G’s $4 Billion Grid-Upgrade Plan

Utility disputes claim that projects will substantially increase bills for residential and industrial customers

Public Service Electric & Gas is facing mounting opposition to its plan to spend nearly $4 billion to harden its power grid to prevent widespread outages during major storms.

In a letter sent late yesterday afternoon to the New Jersey Board of Public Utilities, five of the state’s most prominent lobbying organizations urged the agency to reject out of hand or delay indefinitely PSE&G’s proposal, submitted to the agency in February. They said it would spike utility bills for both residential and industrial customers.

The concerns raised by the groups underscore how difficult it will be for the agency and the state’s utilities to undertake what virtually everyone acknowledges are expensive upgrades to New Jersey’s gas and electric infrastructure. This despite the fact that the upgrades are necessary to prevent disruption of power and heating systems during extreme weather, such as Hurricane Sandy.

Indeed, the letter jointly issued by AARP, New Jersey Citizen Action, the Chemistry Industry Council of New Jersey, the New Jersey Large Energy Users Coalition, and NJ Public Interest Research Group acknowledged that need.

“We fully understand — and do not minimize — the importance of continuous, reliable electric service and the need for a utility infrastructure capable of reasonably withstanding extreme weather events such as superstorm Sandy and Hurricane Irene,‘’ the letter said.

PSE&G agreed. “Unfortunately, storms — and their potential for widespread destruction — won’t wait. With the next storm season right around the corner we are ready to invest in immediate improvements and create jobs now, as well plan for the longer term,’’ said Kathy Fitzgerald , a vice president of the company. She said 6,000 jobs would be created by the utility’s upgrades.

But the lobbyists also questioned the process proposed by the utility, echoing concerns voiced by the New Jersey Division of Rate Counsel, which opposes adding a new surcharge to customers’ bills without going through a contested base-rate case in which each of the utility’s expenditures would be carefully vetted as to its prudency. In the past, several energy improvement programs have been paid for by surcharges on customers’ bills, although the funds are often diverted by the Legislature and previous governors.

The letter also disputes PSE&G’s assertion in its filing that the investment can be made without affecting customer rates. The utility argues that falling natural gas prices and the disappearance of utility surcharges stemming from the deregulation of the energy sector will largely keep electric bills flat.

The lobbying groups disagree, claiming that initial estimates put the surcharge at approximately 0.84 cents per kilowatt-hour.

“This means that a residential ratepayer, already struggling to pay some of the highest rates in the nation, and living in one of the highest cost-of-living states, using 1,200 kilowatt-hours annually would see his or her annual PSE&G bill increase by $100.80. An industrial ratepayer using 85 million kilowatt-hours per year would face an additional annual increase of $714,000. This massive increase on top of New Jersey’s already high electricity prices will continue to put the state’s large businesses at a competitive disadvantage,’’ said to the letter.

PSE&G disputed that argument. “That’s not true,’’ Fitzgerald insisted. “We are going to keep bills for residential and business customers flat.’’

Instead of reviewing the utility’s so-called Energy Strong proposal, the organizations in their letter suggested that the state establish generic proceedings for the gas and electric utilities to consider what responses are necessary to upgrade the power grids.

The groups worried that expedited proceedings by PSE&G would short-circuit and evade necessary regulatory review.

“The costs associated with PSE&G’s wide-ranging proposals are extraordinary and dictate caution and prudence so that this exercise results in more weather-resistant utility distribution systems that are both effective and financially prudent,’’ the organizations wrote in their letter.

The letter also acknowledges efforts by the BPU to upgrade the grid and improve restoration efforts through an order it issued this past January should proceed before the state considers the PSE&G proposal.