JCP&L Gets Closer to Recovering $736 Million in Storm Restoration Costs

But outcome of Jersey Central Power & Light rate case remains uncertain

Credit: Amanda Brown
Ev Liebman, associate state director for advocacy for the AARP.
Jersey Central Power & Light has reached a tentative agreement with state regulators to allow it to recoup $736 million in storm recovery costs stemming from extreme weather in 2011 and 2012.

The settlement still needs to be approved by the New Jersey Board of Public Utilities, but typically the agency supports such agreements when its staff, the state Division of Rate Counsel, and a utility all sign on to a so-called stipulation reached by those parties in a rate case.

Under the agreement, the state’s second-largest electric utility, which has more than 1 million customers, would be allowed to recover virtually all of the $744 million in restoration costs JCP&L incurred during significant weather disruptions during those two years.

The proposed agreement is a rare positive event for a utility that has come under severe criticism from state regulators, consumer advocates, and its customers for its reliability and storm restoration efforts in the past three years — and even longer.

“The stipulation of settlement is a significant step in recovering the hundreds of millions of dollars JCP&L spent to restore customers to service as quickly and safely as possible following the devastating storms that affected New Jersey in 2011 and 2012,’’ said Ron Morano, a spokesman for the utility. “Recovery of storm-related costs is allowed under New Jersey law and is important to JCP&L’s ability to maintain and operate its infrastructure.’’

The bad news is that JCP&L is still facing a significant hit to its bottom line. In a separate base-rate case pending before the BPU, both the staff of the agency and the Division of Rate Counsel proposed cutting the utility’s rates by more than $200 million, a step some say would trim customers’ bills by one-third.

First Energy Corp, the Akron, Ohio-based energy conglomerate that is JCP&L’s parent, reported the news of the settlement, burying the information in one paragraph on page 23 of a 25-page quarterly earnings release.

With New Jersey being hammered by Hurricanes Sandy and Irene, as well a rare October snowfall in 2011 that toppled trees and power lines across the state, its electric and gas utilities incurred nearly $1 billion in storm restoration costs. Other than Atlantic City Electric, and now, possibly JCP&L, most utilities have not yet recovered those costs, which the BPU generally allows if it determines the money was prudently spent.

Not everyone is satisfied with the settlement. AARP of New Jersey and some municipalities that were part of the case refused to sign the stipulation, according to Ev Liebman, associate state director for advocacy for the organization.

“It’s difficult to take a look at this exclusive of everything else that is going on,’’ Liebman said. “If we had better standards (for utility reliability), we wouldn’t be left with ratepayers holding the bag for poor performance.’’

During Hurricane Sandy, JCP&L probably experienced the worst problems of the state’s utilities. Ninety percent of its customers lost power during the superstorm, some of whom were left without lights or electricity for 12 days or more.

In a brief filed by the Division of Rate Counsel in the separate rate case, between 2008 and 2011, the utility’s spending and tree-trimming budget was cut back significantly. According to an agency consultant, 57 percent of outages stemming from the October snowstorm were linked to tree-related problems.

In the proposed settlement, the Rate Counsel’s consultant argued the state should disallow $15 million of the utility’s storm recovery costs because of its failure to trim trees. In the end, the agency and JCP&L agreed to split the difference, reducing restoration expenses by $7.5 million, according to Stefanie Brand, director of the Division of Rate Counsel.

“Symbolically, it’s very important, even though it is a very small amount,’’ Brand said. “It’s the first time there has been a reduction in storm recovery costs. It’s an important message.’’

What the impact on JCP&L customers will be is still uncertain.

The agreement calls to roll in the 2011 storm restoration costs into the still pending base-rate case before the BPU. There is still disagreement over when the utility can recover its much larger storm restoration costs from Hurricane Sandy.

“I don’t think it will have much of an impact on ratepayers,’’ Brand said.