BPU Says State On Target to Hit 2020 Goal for Renewable Resources

Tom Johnson | April 29, 2013 | Energy & Environment
The secret to success: even steeper surcharges for residential, business, and industrial customers

The state still expects to achieve its goal of having more than 20 percent of electricity used by consumers come from renewable sources by 2020 — even with steep cuts in the state’s clean energy program.

But it is not going to be cheap.

Between 2010 and 2012, the cost to gas and electric customers to meet the state’s renewable energy mandates totaled $464 million. It is an expense that’s almost certain to rise as requirements for power suppliers to produce more electricity from solar energy systems and other renewable technologies, such as wind farms, ramp up.

Between 2014 and 2016, those charges are expected to run $580 million — just to meet the mandates for solar systems, according to the New Jersey Board of Public Utilities. The projections do not include the cost of generating 1,100 megawatts of capacity from offshore wind farms (by 2020), which could add billions of dollars to ratepayers’ bills, if it ever happens.

In an analysis of the proposed 2014 fiscal-year BPU budget by the state Office of Legislative Services and the agency’s response, the projected costs of clean energy efforts are detailed at length.

The outlook may cause some utility customers to wince.

Indeed, many in the business community question the state’s aggressive renewable energy goals. Advocates and environmentalists, however, say the costs of the program fail to include the huge public health benefits from reduced pollution and lowered greenhouse gas emissions, which contribute to global climate change.

The cost to the average residential ratepayer for clean energy programs ran $19.63 per year; for commercial customers, $196.27 yearly; and for larger industrial outfits, $1,967.73 annually between 2010 and 2012, according to a response by the BPU to questions asked by the legislative agency.

Those costs only reflect a clean energy surcharge on their bills. The much larger expense of generating electricity and delivering it to homes and businesses is not part of that calculation.

The surcharges, which fund other state programs — including a low-income energy assistance program — have become an increasingly contentious issue in Trenton as they have steadily risen. In 2010, the surcharges generated $792 million, up from the $643 million ratepayers paid just two years earlier, according to the OLS analysis.

In fairness, the clean energy program is not the only factor in the boost in the so-called Societal Benefits Charge (SBC). The state also has expanded its low-income energy assistance program to residents who qualify. They only have to pay 6 percent of their household income for energy bills; the rest is funded by the state. In fiscal year 2014, it is expected the program will cost $325 million, roughly the same as the clean energy program.

Some critics of the surcharges say they reflect a trend among policymakers to pay for popular programs by passing off the costs to utility customers, a step that avoids having to enact new taxes. For its part, the BPU is trying to lower surcharges by slowly moving to a revolving loan fund to pay for clean energy programs, a strategy that drew a cool response from a special working group set up by the agency.

What has made the whole issue more controversial is that the BPU often has raised far more money from the surcharges than it could spend, leaving a huge pot of money for legislators and the Christie administration to grab to help plug holes in the state budget. It is a practice repeated in each year during Gov. Chris Christie’s tenure and, once again may happen this year. Gov. Jon Corzine also raided the fund.

Even without the current proposed cuts, more than $700 million in clean energy funds have been spent for purposes other than intended.

In the proposed fiscal-2014 year budget, the Christie administration wants to appropriate another $196 million from the clean energy program to help balance the budget and pay for other expenses, such as utility bills for state facilities, according to the OLS. That amount, however, does not include another $10 million recently announced by the BPU that is subject to a new diversion by the administration.

With the repeated cuts to the clean energy program, the OLS staff asked the BPU if it expects the state to meet the aggressive renewable energy goals. In response, the agency said it estimates that the requirements will be met, noting that there are enough renewable energy resources in the queue of PJM Interconnection, the operator of the nation’s largest power grid, to achieve the target.

As for the ultimate cost to ratepayers to meet the state’s goals, the BPU argued it is problematic to gauge what renewable energy will cost customers.

“It is difficult to project the financial impact on ratepayers so far in the future given the uncertainty surrounding the development of alternative technologies, the falling prices of certain renewable technologies, improvements to existing technologies, and the potential for development of energy storage and federal energy policies,’’ the BPU said in its response.