BPU Approves JCP&L’s $736 Million Payout for Storm Recovery Costs

Rate case to reduce utility's rates by $200 million still pending before administrative law judge

Jersey Central Power & Light will be able to recover roughly $736 million from its customers to pay for the cost of responding to a series of extreme storms, but when those costs will show up on ratepayer bills is still uncertain.

With minimal discussion, the New Jersey Board of Public Utilities yesterday approved a settlement reached between its staff, the state Division of Rate Counsel, and JCP&L, the state’s second-largest electricity utility with more than 1 million customers.

For the utility, the approval of the settlement may cushion the impact of a pending decision in a separate rate case before the agency. Both the BPU staff and the Rate Counsel are seeking to cut the utility’s rates by more than $200 million, a step some say would trim customers’ bills by one-third.

Those savings, however, would be eroded by the settlement approved by the BPU in Trenton yesterday. It would fold $163 million in recovery costs from Hurricane Irene and a rare October snowfall in 2011 into the rate case now before an administrative law court judge.

That is a typical strategy adopted by the BPU to minimize rate increases when they are approved. It often OKs a more modest rate increase than the one proposed by the utility — in this event perhaps an unusual reduction — with another proposal to lower bills for customers, occasionally in disputed cases stretching over several years.

How the rest of the storm recovery costs, projected to run about $580 million, will be recouped is still uncertain. The settlement also shaves $7.5 million off the overall settlement costs.

The settlement approved yesterday puts off deciding how and when the costs –mostly resulting from Hurricane Sandy — would be recovered. The superstorm probably affected JCP&L worse than any of the state’s electric utilities.

For example, 90 percent of its customers lost power during the storm, some of whom were left without lights or electricity for 12 days or more. Its response to Sandy and other events have spurred closer scrutiny of the utility by the BPU, which has questioned whether it is investing enough in maintaining its infrastructure.

Still, JCP&L applauded the board’s action yesterday.

“The board’s approval is a recognition of the extraordinary costs the utility incurred,’’ said Ron Morano, a spokesman for JCP&L. “It’s the first steps to recover our recovery costs.’’

But Morano said the utility would like to see the costs incurred from Hurricane Sandy also rolled into the pending rate case.

Whatever, the outcome, state regulators believe it will not cause bills to spike.

“I don’t think it will have much of an impact on ratepayers,’’ Division of Rate Counsel told NJ Spotlight in February.