If a $1 billion tentative settlement wins approval from regulators, customers of Public Service Electric & Gas will still see a drop of at least 5 percent in their electric bills, according to Stephanie Brand, director of the New Jersey Division of Rate Counsel.
Speaking at an event sponsored by AARP New Jersey, Brand said the proposed agreement with the state’s largest utility should reduce bills even with the investment PSE&G’s grid upgrade will involve, primarily because surcharges stemming from the deregulation of the energy industry in 1999 will be eliminated.
The tentative settlement, reached between the Rate Counsel, PSE&G, and other interveners in the case, could end a long-running dispute over the utility’s proposal to spend $2.6 billion to harden its electric and gas infrastructure to prevent the kind of widespread outages customers endured during Hurricane Sandy.
The proposed deal is expected to be on the agenda of the state Board of Public Utilities at its monthly meeting, a week from today, according to Brand.
The so-called Energy Strong program, backed by more than 100 municipalities and many business groups, is viewed as a necessary step to improving reliability of the power grid, and potentially reducing outages to customers in the event of another extreme storm, such as Sandy.
Brand agreed, during a question-and answer-period with AARP members on a teleconference call.
“We think it is likely there will be another storm,’’ she said. “If there is another storm, these measures will help.’’ It won’t reduce outages completely, Brand acknowledged.
But the tentative deal is greatly scaled back from what the utility originally proposed, a fact that both Brand and AARP, two prominent interveners in the case made a point of noting yesterday at the event.
Even with the approval of the settlement, Brand noted the $1 billion investment by PSE&G will be offset by the disappearance of rate surcharges stemming from energy deregulation. Those charges reflect about 10 percent of customer bills, depending on how much electricity is used, she said.
PSE&G said they are eager to get on with the work of hardening the power grid. Beyond the $1 billion in the proposed settlement, the utility also can spend another $200 million, if approved in a future rate case before the BPU.
“We are just excited to get the work done to make the system more reliable and better prepared for the next storm,’’ said Paul Rosengren, a spokesman for Public Service Enterprise Group, which owns PSE&G. “While there’s more we think we can do to help, we’re glad to get started with this important work.’’
The bulk of the money ($620 million) will be spent on upgrading 29 switching stations and substations flooded during Hurricane Sandy. Outages at these stations left tens of thousands of customers, if not more, without power.
Brand agreed. If you don’t have flooded substations, there will be less outages, she said.
Another $350 million will be used to modernize 250 miles of low-pressure cast-iron gas mains in near or flood areas. And $100 million will be used to add redundancy to the power grid, allowing other circuits to provide electricity if one system fails.
The PSE&G case is the first of several expected to come before the BPU to reduce both electric and gas outages, a high priority given how many people and business were left without power during Hurricane Sandy.
Utility customers also could see other increases on their bills from both gas and electric companies seeking to recover hundreds of millions of dollars spent to restore power to customers after Sandy, Hurricane Irene, and other extreme storms.