Coalition Moves to Block PSE&G Proposal to Harden Power Grid

Disagreements over how much Energy Strong program will increase consumer gas and electric bills

Jeff Tittel, director, Sierra Club of New Jersey
The state should reject out-of-hand a nearly $4 billion proposal by Public Service Electric & Gas to harden its electric and gas infrastructure, according to a coalition of consumer groups, manufacturers, and environmentalists.

In a teleconference with reporters, the New Jersey Coalition for Affordable Power ramped up the rhetoric in what is an increasingly bitter fight between the utility and interveners and others involved in a case pending before the state Board of Public Utilities.

It has put the agency in a tough predicament: It is under pressure from the governor’s office to take aggressive steps to avert the widespread outages like those that occurred during Hurricane Sandy just a year ago, which left 7 million people in the dark. At the same time, the utility’s proposal also has won backing from more than 70 municipalities, seven counties, and many major business groups. They view the proposal as a way to harden the grid and avoid the huge economic losses caused by the virtual shutdown of much of the state for weeks or more.

But the proposal, if approved, could increase residential customers delivery costs for electricity by nearly 20 percent, and by 14 percent for gas, according to a consultant retained by one of the interveners. The BPU’s own projections are much lower. It says bills would rise by only 5.4 percent, but that is still a concern in a state long saddled with some of the highest energy costs in the nation.

To opponents of the proposal, it is not a tough call at all.

After reviewing thousands of pages of filings in the case, Evelyn Liebman, associate director for AARP NJ, described PSE&G’s so-called Energy Strong proposal as “fatally flawed’’ and “not ready for prime time.’’

The coalition’s stance is not likely to immediately affect the outcome of the case, which is probably headed to evidentiary hearings in the first quarter of next year before one of the BPU commissioners. Its objections, along with those of the New Jersey Division of Rate Counsel, however, signal that the BPU may have a hard time reaching a settlement in the case — and that the project may not win approval as quickly as the utility hoped.

With its fleet of unregulated power plants not making as much money as they used to just a few years ago, Public Service Enterprise Group, the owner of PSE&G, has shifted most of its capital investments into the utility. What angers critics of the project is their argument that the utility is seeking upfront payment for the cost of Energy Strong from ratepayers. Instead, they argue the funds for the effort ought to come from bondholders as part of a typical capital investment effort to maintain the reliability of the power grid.

In the past, under the traditional rate-case system, the utility would invest the money and then seek recovery of those costs from state regulators once the expenditures were deemed prudent in a contested proceeding.

“Public Service could implement Energy Strong today,’’ argued Steven Goldenberg, an attorney representing the New Jersey Large Energy Users, a group representing manufacturers and other large users of energy. “It won’t do so until it is given extraordinary rate recovery,” he said.

A spokesman for the company disputed that assessment. “Would any of Mr. Goldenberg’s companies be willing to put up $4 billion and wait four to five years to recoup their investment and not know what their rate of return is?’’ asked Michael Jennings, a spokesman for PSEG.

“The reality is these are not normal reliability projects,’’ Jennings said, adding for five out of the past eight years, PSE&G has been named the most reliable utility in the country.

Jeff Tittel, director of the New Jersey Sierra Club, argued otherwise. “This is the ulttimate Halloween trick or treat. PSE&G takes our money and tries to trick us into believing this will prepare us for the next storm.’’