In a decision that could serve as a template for other electric utilities, state regulators yesterday unanimously approved a $1.2 billion program by Public Service Electric & Gas to harden its grid and reduce outages that occur during extreme storms such as Hurricane Sandy.
The approval by the New Jersey Board of Public Utilities follows a protracted and often bitter battle over a proposal filed by the Newark utility in February 2013 to shore up its electric power distribution system and gas infrastructure — a step the agency is pressing other gas and electric utilities to take following a string of severe storms dating back to 2011.
The settlement approved by the BPU is much less than the $2.6 billion the utility sought to originally spend over the next five years, but it still would allow the company to deal with one of the most pressing issues pinpointed by Sandy — the flooding of 29 switching stations and substations, which left tens of thousands of customers without power.
The settlement also includes money to upgrade cast iron gas mains that flooded during Hurricane Sandy and take other measures to upgrade the utility’s gas system.
In approving the settlement, agreed to all but one party in the contested case, BPU commissioners repeatedly described it as “fair and balanced,’’ one that recognizes the need to upgrade the power grid while protecting the interests of ratepayers.
In total, the proposal reflects the largest infrastructure settlement ever approved by the agency for a utility, according to BPU President Diane Solomon.
BPU Commissioner Joseph Fiordaliso, who presided over long hearings on the case, warned the deal is not going to eliminate power outages for customers.
“The hope is those outages will be of shorter duration,’’ he said. “The outages won’t last weeks.’’
Fellow BPU Commissioner Mary-Anna Holden said the settlement “sets the bar for other electric distribution companies.’’ The agency is requiring those utilities to come up with similar plans to harden the power grid to make it more resilient in the event of future extreme storm.
By most accounts, the program — to be paid for by the utility’s 2.2 million customers– will have a minimal impact on energy bills. Ev Liebman, associate director of AARP New Jersey, which participated in the yearlong case, estimated it would increase bills by between 1 percent and 2 percent.
That projection, however, does not include a current series of surcharges stemming from the deregulation of the energy industry dating back to 1999. Those charges will be eliminated in the next few years. When they disappear, customers could see bills drop by at least 5 percent, according to the New Jersey Division of Rate Counsel.
Many provisions in the settlement will make sure what money is spent on upgrades is prudently expended, according to Liebman. “It does set a good precedent for the future,’’ she added.
PSE&G said it will work with regulators to include some parts of its original proposal that were not in the deal approved by the BPU yesterday at its monthly meeting in Trenton.
“It’s a good start,’’ said Jorge Cardenas, vice president of asset management and centralized services for PSE&G, after the vote. “There’s much more work that needs to be done.’’ The utility’s original petition called for a $3.9 billion investment over a 10-year period.
The agreement is likely to provide little relief before the next hurricane season begins next month. Cardenas said the gas work will likely begin in the next few weeks, but the elevating or building flood walls around the electric substations to prevent them from flooding is not expected to begin until the fall.