Annual Power Auction Could Result in Lower Bills for Some Customers

Deciding factor could be if state utilities are given the go-ahead on storm-recovery costs

BPU President Dianne Solomon
For maybe half of the state’s utility customers, the cost of electricity will dip slightly beginning next June. Or maybe not.

For the fifth consecutive year, a state-run auction to allow utilities to purchase the power they need to service customers who do not switch to “third-party” suppliers has led to lower or stable energy costs for consumers, according to the New Jersey Board of Public Utilities.

But not for most customers of Public Service Electric & Gas, the state’s largest electric utility with 2.2 million customers — more than the other three utilities combined. The 1.8 million customers who have stayed with PSE&G (at least as of December 2013) and not switched suppliers will see their bills rise a bit, by 1.1 percent or $1.28 a month when averaged over the entire year.

For the three other state utilities, customers will see equally modest decreases in their bills, ranging from 2.75 percent a month for the half-million customers of Atlantic City Electric, through 1.7 percent for Jersey Central Power & Light’s more than 1 million customers, to 0.7 percent for the more than 66,000 customers of Rockland Electric.

Those savings, however, could be eroded — or in the case of PSE&G’s prices, be boosted — depending upon the outcome of rate cases pending before the BPU. Utilities are seeking to recover nearly $1 billion in costs stemming from Hurricane Sandy and other storms for restoring power to customers. PSE&G also is seeking approval of a $2.6 billion plan to harden the grid from state regulators.

Still, BPU officials hailed the result of the state’s 13th annual electricity auction, which started Friday and ended Tuesday. The supplies secured during the auction will meet one-third of load requirements for small businesses and residents, starting this June. The other two-third of requirements are met by supplies purchased in previous state-run auctions.

“Actually, it is a good result that shows stability,’’ said BPU President Dianne Solomon in a conference call with reporters to discuss the results of the auction.

The latest auction results benefited from the unique structure of the way the state’s utilities buy power. It blends the results of the previous three years’ auctions into a single price customers pay — a system that works to avert price spikes when power prices rise, but works against consumers when power prices dip.

This time, it worked. The latest auction rolled off higher prices utilities had to pay for power in 2011, accounting for the slight dip in the costs of electricity for three of the state’s four electric utilities.

In PSE&G’s case, the higher costs were attributed to increased investments in transmission lines, expenditures that might end up reducing costs to ratepayers by reducing congestion on the power grid and the need to pay power plants steep capacity payments to ensure there is enough juice to keep the lights on.

Karen Johnson, a spokeswoman for PSE&G, said the transmission projects were deemed necessary by the PJM Interconnection, the operator of the nation’s largest power grid. “PSE&G is investing about $3.5 billion in projects that will replace aging infrastructure and upgrade lines and switching stations to maintain reliability,’’ she said.

JCP&L also may boost customers’ bills by the planned investment in $150 million of new transmission projects it announced earlier this week.

Those issues underscore how the state’s ability to limit higher electric bills has been constrained by the decision to deregulate the industry in 1999, a move hailed at the time of bringing lower costs to consumers and businesses in a state with some of the highest energy bills in the nation.

For larger commercial and industrial customers, the outcome of the auction proved to be much better. They will see even larger decreases in electric bills, although customers served by PSE&G will experience a small rate increase, according to the BPU.