Explainer: SOCIETAL BENEFITS CHARGE Fuels Clean Energy, Other Programs

Tom Johnson | August 6, 2013 | Explainer
A small tax -- at least for consumers -- on monthly utility bills that raises millions for a variety of projects and programs

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In 1999, when the state broke up its electric and gas monopolies, a little-noticed provision in the legislation imposed a surcharge on customer utility bills. Dubbed the societal benefits charge, it would pay for a variety of programs in the energy and utility sectors deemed worthy of financing by policymakers. Few knew then, however, how costly the program would be.


In 2012, the SBC cost utility customers $790 million, a small rise from the $777 million it netted the previous year. Only the income tax, sales tax, and corporate business tax raise more from residents and businesses statewide — excluding property taxes, which are imposed by local governments. In the past decade, the surcharge has raised more than $5 billion from electric and gas customers.

What it does

The two biggest chunks of the program involve efforts to finance clean energy programs ($309 million in the 2012 budget) and efforts to help low-income families pay their utility bills (at least $292 million), according to numbers provided by the New Jersey Board of Public Utilities. The low-income program has grown dramatically since the state passed a law ensuring that those families do not pay more than 6 percent of their household income on energy bills.

The SBC also finances other programs: $27 million to pay utilities for bills they are unable to collect from customers; $83 million to pay for the costs of cleaning up former manufactured-gas sites, which were used to produce electricity. It further set aside $78 million for assorted social programs, helping customers in need obtain discounts on their phone and assisting seniors who have questions about their utilities, among other programs.

Previously, the fund helped pay for the tab for decommissioning nuclear power plants and consumer education programs, but not so in the 2102 budget proposed by the state.


The program has spiked in costs as New Jersey embraced aggressive efforts to promote renewable energy, such as solar, to generate electricity. Originally, the program provided lucrative rebates to homeowners and businesses to install solar arrays, but the state switched to a free-market system, in part relying on an arrangement in which utility ratepayers absorb the costs for the electricity their solar panels produce.

Why people like it

What’s not to like? The SBC helped transform New Jersey into the second-largest developer of solar systems in the country, depending upon what scale is used. It also has funded a wide variety of energy efficiency projects that reduce gas and electric consumption, a move that saves big dollars for both businesses and residents. In the proposed budget for the current fiscal year, the clean energy fund also has set aside $100 million to promote the development of combined heat and energy (CHP) plants, a way of producing electricity more efficiently and with less pollution than conventional power plants.

Why people hate it

Primarily, because the state has typically raised more money from ratepayers, who already are saddled with some of the highest energy bills in the nation, than it can spend in any given year. The result: More than $800 million in clean energy funds have been diverted by lawmakers and the Christie administration to plug holes in the state budget in recent years, a tactic some call a hidden tax.

The majority of money generated by the surcharge comes from businesses and other institutions, all of which use a large amount of energy. Some companies pay more than $1 million a year due to the surcharge. The bill to residential consumers is much smaller, averaging about $5 or more each month.

What lies ahead

Uncertainty. The Christie administration has talked about reducing the surcharge on customers by instead turning it into a revolving fund, that would replenish the money by loans from customers who engage in clean energy projects. The approach did not get an enthusiastic review from a special working group to assess the issue appointed by the administration. In the meantime, legislators are crafting bills to allow big businesses to divert money they would have paid into the SBC for energy projects, if they qualify. Overall, the Legislature does not seem inclined to change the surcharge, happily embracing the programs it supports.

Meanwhile, the BPU is being more aggressive about raising only the money it needs to support ongoing programs, avoiding the criticism it raises far too much than it can spend.