PSE&G May Ramp Up Energy-Efficiency Program, Dig Up Old Gas Pipes

Tom Johnson | July 31, 2014 | Energy & Environment
Possible plans for future, including bigger investment in 'Energy Strong' discussed during PSEG earnings call

PSEG President, Chairman, and CEO Ralph Izzo
Public Service Electric & Gas is talking with state regulatory officials about developing a $100 million program to fund energy-efficiency projects in New Jersey.

The program is viewed as an extension of similar efforts by the Newark utility to help hospitals and low-income residents cut their energy bills, according to Ralph Izzo, president, chairman, and chief executive officer of the Public Service Enterprise Group, the parent company of PSE&G.

Izzo disclosed the conversations during PSEG’s second quarterly earnings call with analysts.

The energy-efficiency programs have proven very popular, especially with healthcare facilities. There is a waiting list to have the utility handle a number of different projects, including lighting retrofits, improvements in thermostat controls, and upgrades to air-conditioning units, all of which reduce energy bills.

“In New Jersey, we are seeking to continue existing programs,’’ said Izzo, when asked about the issue on a media call with reporters after the earnings call.

Izzo also elaborated on other projects that might be in the utility’s pipeline in the next few years. These include filing additional plans to advance its $1.22 billion “Energy Strong” program, approved by the state Board of Public Utilities earlier this year, possibly before the program has run its course.

The earnings results reflected how the parent company is relying on its profits from PSE&G to provide more than 50 percent of PSEG’s profits for the year, a sharp contrast to the past when its unregulated fleet of power plants was the engine behind the company’s growth.

Much of that is attributed to the company’s aggressive capital investment program in the utility, primarily driven by efforts to upgrade its transmission system. Over the next five years, PSEG plans to invest $11.3 billion in capital investment in various projects, mostly involving the utility, an increase from the $10.1 billion it previously projected.

More projects may be forthcoming, maybe with a much higher price tag.

The utility is spending $350 million to replace its oldest and most leak-prone cast-iron gas pipes, which deliver fuel to residents and businesses, as part of its Energy Strong plan to upgrade its infrastructure to make it more resilient to severe weather.

The gas projects have an additional benefit. The pipes leak methane, a highly potent greenhouse gas, into the air — a source of growing concern to the Obama administration, which is proposing ways to clamp down emissions from leaks in gas pipelines as a way of addressing global climate change.

Under the Energy Strong program, the utility plans to replace about 250 miles of cast-iron pipe, but PSE&G has more than 4,000 miles of those pipes, according to Izzo. And replacing them is not cheap.

Izzo said it costs $1.4 million per mile to replace the cast-iron pipes. He estimated it would take at least 20 years to replace the other old gas lines, although it might not happen within that timeframe. “It is really a question of the agency’s (BPU’s) comfort with the program,’’ he said.

It’s also a matter of how much those replacements would boost customers’ bills. In an older and densely populated state like New Jersey the fact that much of its infrastructure is aging is likely to become a more difficult issue to address in the future, not only for energy utilities, but also for water suppliers.

But the advantage of reducing methane leaks from the aging cast-iron pipes may be an added reason for doing the program, Izzo said. He argued the state’s efforts to comply with an initiative from the Obama administration to curb greenhouse gas emissions should include efforts to reduce methane leaks from natural-gas pipelines, as well as promoting electrical vehicles.

Unlike most states, transportation is the biggest source of carbon dioxide contributing to global climate change in New Jersey, according to Izzo. The utility recently announced a pilot program to provide up to 150 electric plug-in charging stations to employers who sign up at least five of their workers to commute to work in electric vehicles.