PSEG Argues $2.6B “Energy Strong” Plan Is About Reliability, Not Rate Hikes

At company's annual stakeholder meeting, company's top corporate officer decries 'obsession on rates'

Ralph Izzo, chairman, president and CEO of PSEG
Expressing his increasing frustration, Ralph Izzo, the head of Public Service Enterprise Group, said the proposal by its utility to spend $2.6 billion to harden the grid is too focused on rates rather than on safety and reliability.

Izzo is chairman, president, and CEO of PSEG, the parent of Public Service Electric & Gas.

“My fear is there is an obsession on rates,’’ he told reporters after the company’s annual shareholder meeting at the New Jersey Performing Arts Center in Newark. “If we simply turn this into a rate discussion, then nothing can be done.’’

His comments focused on a PSE&G proposal, which has generated as much opposition as support, to spend billions of dollars over the next five years to avert the widespread power outages that occurred during Hurricane Sandy and other extreme weather. It was first filed with regulators in February 2013, but has not yet been acted upon.

The proposal eventually could cost $3.9 billion over the next decade if approved by state regulators, although the current petition calls for $2.6 billion in expenditures over the first five years of the program. Much of the money would be spent on preventing electrical substations from being flooded in future storms, an occurrence that left may without power during Sandy.

The utility claims the proposal would have a minimal impact on costs to its customers, largely because of sharply lower natural gas prices and the elimination of surcharges relating to the deregulation of the energy industry back in 1999.

The New Jersey Division of Rate Counsel disputes that view. In briefs filed with the state Board of Public Utilities in an ongoing rate case on the issue, the agency claims the proposal would boost distribution rates by up to 20 percent for electric customers and by 16.5 percent for gas customers.

Izzo disagreed. In his comments to shareholders he said the company’s “Energy Strong” program would fortify critical installations against storm surges; strengthen distribution lines; and deploy technologies to help the utility monitor conditions and identify issues and restore customers more quickly.

“These improvements will significantly benefit all of our customers and can be made with little impact on their bills because of certain expiring charges, low interest rates, and low prices for natural gas,’’ Izzo said in his prepared remarks.

Yet those arguments have failed to sway some, including the BPU. It staff recommended that the Energy Strong program be trimmed in the first five years to $1 billion, according to a story in NJ Spotlight earlier this year. Hearings on the case have concluded, but PSE&G recently requested an extension to continue negotiations with various parties in an attempt to reach a settlement.

Without a settlement, the litigation may well play out until June, Izzo said. “We’re still hopeful, but it does seem more of a challenge,’’ he said referring to ongoing settlement discussions.

How frustrated is Izzo? “On a scale of 1-10, I would say 11, he said, when asked about the slow pace of the review of the project.

The case has drawn much scrutiny because it may signal how far the BPU will go in approving rate increases for customers while approving plans by the state’s utilities to take expensive steps to harden the gas and electric grid to prevent the type of widespread outages that occurred during Hurricane Sandy.

Other utilities, such as New Jersey Natural Gas, already have proposed their improvements to their infrastructure to deal with extreme storm events. The BPU also is conducting a separate proceeding to determine what other utilities need to do to prevent outages.