PSE&G Hopes Settlement Discussion Will Let $2.9B Grid Upgrade Move Ahead

BPU needs to carefully balance utility expenditures against state's steep power prices

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With hearings set to begin in two weeks, a new settlement session is scheduled Wednesday between Public Service Electric & Gas and opponents to its plan to spend $2.9 billion over the next five years to harden its gas and electric infrastructure.

Whether the meeting resolves differences in the case — described by one participant as a divide as wide as the Grand Canyon — remains to be seen. For the state’s largest utility, however, a quick settlement remains its best hope to move quickly forward on the project before the next hurricane season begins in June and to begin earning profits on the expenditures it makes.

The case, filed a year ago by PSE&G, has become a focal point of how the state deals with the widespread outages, which left seven million customers without power, caused by Hurricane Sandy in October 2012. Not only PSE&G, but the other gas and electric utilities have already filed or are expected to file plans to upgrade their grids to prevent such service interruptions.

For state officials, the case involves a delicate balancing act — how much of an expenditure to approve for all of the state’s utilities without spiking energy bills, which already rank among the highest in the nation. But Sandy clearly demonstrated the power grid is not equipped to deal with extreme storms.

PSE&G originally proposed spending $3.9 billion over a decade to upgrade its power grid in what it dubbed “Energy Strong,” but the proposal before the BPU only deals with the first five years of the program.

Typically, the state’s utilities prefer to reach a stipulated settlement with opposing parties in rate cases to reduce litigation costs and delays associated with increasing their revenue base from new programs approved by the New Jersey Board of Public Utilities.

That appeared unlikely until late Tuesday when BPU staff urged participants in the case to schedule another settlement discussion. At the most recent discussion in early January, the staff’s proposal met with a cool response from all participants, according to those familiar with the discussions — not enough for PSE&G and too much for critics of the plan.

In a statement from PSE&G, Paul Rosengren, a spokesman, said the company remains hopeful it can reach a negotiated settlement on its Energy Strong proposals. “As with any case, we will pursue dual strategies seeking settlement with the other parties while developing our case for possible evidentiary hearings,’’ he said.

“We believe that there is strong justification for Energy Strong investments, investments that will help ensure New Jersey is ready for the next Sandy, increase the reliability of the electric system, and create thousands of jobs,’’ Rosengren said.

That view was disputed by foes of the proposal.

“We still have a lack of evidence to support what looks like a blank check for the company,’’ said Ev Liebman, associate director of the New Jersey chapter of AARP.

Referring to the prospect of an evidentiary hearing before an administrative law court judge, Liebman said that would produce a full record on the rate case to be developed, a positive step for consumers.

Steven Goldenberg, an attorney representing companies using a large amount of energy — both electricity and gas — agreed. He said there is a tremendous divide between the position of the company and ratepayers who would have to “foot the bill for this expensive program.’’

Business lobbyists did not share those concerns, nor did scores of towns and counties who want the utility to proceed with the program to prevent the kind of outages that occurred during Sandy. They have urged the BPU to approve the initiative — as did four PSE&G unions participating in the settlement discussion.

“Although it’s hard to picture hurricane season with so much snow on the ground, the proposed improvements to the electric and gas distribution systems will pay off when the next superstorm hits, and we shouldn’t wait to play the odds,’’ said Roger Schwarz, a lobbyist representing the unions.