Great Divide Still Separates Proponents and Critics of PSE&G’s ‘Energy Strong’

Skeptics question the sheer size of the $2.6 billion proposal, want to know how it will affect ratepayers

Credit: Amanda Brown
BPU president Joseph Fiordaliso
A year after filing for an unprecedented ramp-up in spending to avert widespread power outages in future extreme storms, the gulf between what Public Service Electric & Gas wants to do and what critics deride seems no closer to narrowing.

In a packed but smallish room at the headquarters of the New Jersey Board of Public Utilities in Trenton, evidentiary hearings yesterday began on the Newark utility’s “Energy Strong” proposal to spend $2.6 billion over the next five years to harden its gas and electric power grid — with few signs that an agreement is within reach anytime soon.

The week-long hearings will lay out the case whether PSE&G can spend ratepayers’ money to protect 29 electrical substations from flooding — an event that caused hundreds of thousands of customers to lose power during Hurricane Sandy — and millions of dollars for other infrastructure improvements to its electric and gas systems.

Almost no one in the heavily litigated case disputes improvements need to be made to utility infrastructure in the wake of extreme weather, critics dispute the extent of the utility’s investment and how it should recover those costs.

PSE&G argued the public is demanding the utilities make those investments as a way of preventing outages that occurred in recent storms that left millions without power, some for a week or more.

“The evidence will show that these proposals and positions of our opponents are not reasonable, prudent and appropriate courses for PSE&G, its ratepayers or the state,’’ said Matthew Weissman, an attorney representing the utility in an opening statement to BPU Commissioner Joseph Fiordaliso, the presiding officer in the case. “The people of New Jersey, and the board, expect us to take action.’’

While the utility filed for a $2.6 billion investment program over five years, that seems unlikely to be approved. In settlement discussions between the BPU staff, the Division of Rate Counsel, PSE&G, and others in the case, the agency took the position of trimming the program down to $1 billion, far less than what the utility originally proposed. It is now asking for $1.9 billion, according to sources who talked to NJ Spotlight.

Weissman hinted at the utility’s frustrations in his opening remarks, saying the effort to avert flooding at its substations should not be based on the number of customers served by each facility, a determination that would force the company to “pick and choose’’ which customers avert outages.

“We strongly believe all 29 of these stations should be addressed in the first five-year phase of our proposal,’’ Weissman said. Over the next decade, the utility wants to spend $3.9 billion on its hardening program.

As in the past, the cost of the program drew sharply varying views from participants in the case. Weissman argued the five-year program would result in a [link:|
4.5 percent boost in electric bills and 5.7 percent for gas customers].

Division of Rate Counsel Director Stefanie Brand suggested the impacts to ratepayers would be much more severe over the long-term. “By 2019, it will increase electric rates by 20 percent over current rates and gas rates by 16 percent over current rates,’’ she said.

“So what would ratepayers be getting for that rate increase?’’ asked Brand. “Based on the company’s own data, we will be getting a modest improvement in our ability to weather these storm events.’’

For instance, Brand said her agency’s consultants will testify that only 1,400 of the utility’s customers experienced outages. Yet the company plans to spend nearly $1 billion of the utility’s proposal on replacing cast iron gas mains that did not flood during the storm and are not even in a flood zone.

Others questioned the sheer size of the PSE&G proposal, especially given other rate issues pending before the agency, ranging from storm restoration costs to new solar programs to increased investments by utilities in transmission projects, the last issue not reviewed by the BPU.

“It doesn’t seem that long ago that a hundred million dollar rate case was considered quite large,’’ said Steven Goldenberg, an attorney representing a coalition of manufacturers and others who use a large amount of electricity and gas.

“In terms of PSEG’s current and proposed capital expenditures, $100 million represents little more than a rounding error, particularly if the billions of dollars that PSE&G is currently spending on transmission is taken into account,’’ he said.

Other interveners in the case complained the utility was seeking to pass on the costs of the program through a surcharge, outside of a traditional rate case. “This turns a century of public utility law and regulation on its head,’’ said Janine Baure, counsel for AARP.

Others argued that the PSE&G proposal would allow the utility to recover the costs of its investments almost immediately, a step that would transfer nearly all of the risks to ratepayers.

The utility’s proposal, however, won strong support from labor unions, which work for the company, who argued extreme storms like Hurricane Sandy are likely to happen again.

“Yesterday’s storm of the century is followed by tomorrow’s storm of the century,’’ said Roger Schwarz, an attorney representing four PSE&G labor unions.

“It seems like a simple choice,’’ he said. “We can continue reacting to what Mother Nature dishes out, or we can act now to better prepare for the next super storm.’’