Rate Counsel Claims It Was Frozen Out of BPU Solar Settlement

Agency votes next week on $247M stipulated settlement with PSE&G

In an unusually acrimonious dispute, the New Jersey Division of Rate Counsel is protesting a proposed settlement between a state agency and the state’s largest electric utility that will allow Public Service Electric & Gas to spend $247 million to develop solar systems across New Jersey.

The state Board of Public Utilities is expected to vote on the so-called stipulated settlement next Wednesday. The issue has been heavily litigated before the agency for nearly a year, and much of the rancor surrounding it stems from how the proposed settlement was reached.

Both Rate Counsel and another opponent of the proposed deal — the New Jersey Large Energy Users Coalition — argue that those representing ratepayers’ interests were “systematically and deliberately excluded from a series of surreptitious settlement meetings,’’ according to a brief filed by the coalition.

That view is disputed by PSE&G. “In the company, we were hoping to reach settlements with all parties,’’ said Terry Moran, director of market strategy and development, adding that there were many discussions with Rate Counsel and others to reach a stipulated settlement. “They were not excluded. The issue is Rate Counsel had a position they would not move from.’’

Division of Rate Counsel Director Stefanie Brand contested that point. “What is unprecedented, we weren’t brought in to have any meaningful input so we could reach a settlement,’’ Brand said, noting by the time they were brought to the table, it was a done deal between the BPU and the utility.

In contested cases before the BPU, it is not unusual for a stipulated settlement to be reached, even with some parties refusing to sign the agreement, including Rate Counsel. What is unusual about this case — at least according to Brand — is that counsel was excluded from the negotiations that led to the settlement.

Steven Goldenberg, an attorney for the large energy users, agreed. When Rate Counsel and he were finally brought in to discuss the proposed settlement, it was largely presented on a “take it or leave it basis,’’ according to a brief the lawyer filed in the case.

“Thus viewed, the stipulation is fatally defective, the product of closed-door, surreptitious negotiations, between persons unknown, who ignored the interests of ratepayers — who will ultimately pay hundreds of millions of dollars to support [the program] and solar developers whose business interests are not aligned with the company’s,’’ according to the brief.

As a matter of fact, several big solar associations signed on to the agreement. They, of course, are expected to help PSE&G fulfill the requirements of the settlement, which includes building 42 megawatts of grid-supply solar projects, on brownfields, landfills, and areas of historic fill — material generally deposited to raise the elevation of a site, which was considered contaminated before the deposit was made, according to state environmental officials.

In a separate case, the BPU is expected to also approve a plan by the utility to finance another 97.5 megawatts of new solar systems for homes and businesses under a loan program, another effort that will create jobs and profits for solar companies in the state.

The tensions and controversy over the settlement reflect the fractured nature of the solar energy industry, as well as concerns about how to revive a sector, which once was thriving, but has stalled because of falling prices that owners of solar arrays earn for the electricity they produce.

The settlement is a scaled-down version of what PSE&G had originally suggested: a $883 million investment over five years to build 233 megawatts of new solar capacity. By far, PSE&G has been the most aggressive utility in helping New Jersey try to achieve ambitious goals to increase the use of solar energy in the state. It currently ranks as the third largest developer of solar systems in the nation.

Still, Brand and others say the parent company of the utility should not rely on ratepayers’ subsidies to pursue its goals to build more solar systems. Goldenberg, in his brief, noted its unregulated subsidiary has developed numerous projects in other states without ratepayers’ subsidies under power-purchase agreements.

“This same approach to solar development, acknowledged by Mr. [Ralph] Izzo to be a ‘win-win’ proposition for customers and shareholders is precisely the model that Rate Counsel and NJELUC have repeatedly urged PSE&G to pursue it New Jersey-based programs,’’ Goldenberg argued.

The issue of how much subsidies from ratepayers add to customers’ bills is a particularly sore point for businesses, which pay more than 60 percent of the cost through surcharges on their bills. It is part of the motivation of the large energy coalition in opposing the PSE&G initiative.

Brand took a different tack. She argued giving PSE&G a guaranteed 10 percent rate of equity on its investment gives it an unfair competitive advantage over other solar developers in the state. It allows the utility to develop solar facilities without cost or risk “because the company would be ‘backstopped’ by captive ratepayers.”

Moran argued otherwise, saying the utility would solicit competitive bids from solar developers to build the installations at the lowest cost to ratepayers. “Our view it is a reasonable settlement based on the arguments of all the parties,’’ Moran said.