PSE&G Seeks to Spend Nearly $110 Million to Boost Energy Efficiency

Popular program provides upfront funding for upgrades at hospitals, multifamily buildings, nonprofits and government facilities

At JFK Medical Center in Edison, workers maintain one of two new energy-efficient air-conditioning chillers installed at the facility.
Public Service Electric & Gas yesterday proposed investing $109. 8 million to help hospitals, multifamily housing units, nonprofits and government agencies cut their utility bills through a range of energy efficiency programs.

In a filing with the state Board of Public Utilities, the state’s largest utility proposed extending a highly successful multipronged energy efficiency program, which has served those sectors in the past. All existing funding from the prior program, proposed in 2011, has been committed, according to PSE&G.

The previous program proved so popular there is a backlog of 26 hospitals and 45 multifamily units seeking to have PSE&G undertake energy efficiency projects, according to the filing. Typically, the work involves replacing or upgrading heating and air-conditioning units, lighting retrofits, improving thermostat controls and insulation, and other measures.

PSE&G provides the upfront capital for the work. The facility pays back that money over a three- to 10-year period in their utility bills. The costs are generally more than offset by the savings, according to Jess Melanson, director of energy savings for PSE&G.

“We want energy efficiency to be a bigger part of what PSE&G does,’’ he said.

Based on the interest in the program, so do the utility’s customers.

Hillcrest Management Corp, an owner of senior-citizen buildings, said its energy bills dropped $320,000 annually after work at one of its facilities. It will only pay $180,000 for the next five years, according to a letter supporting the PSE&G filing.

“This is the best program in PSE&G history and its real world impact on the lives of my seniors is substantial,’’ wrote Kevin Krier of Hillcrest, citing improved lighting making it easier for aging eyes to see and an improvement in air quality.

The proposal also won strong support from Dale Bryk of the Natural Resources Defense Council and Tom Schuster of the Sierra Club.

In a joint letter to the BPU, they called the program “critical to delivery of safe, reliable energy savings to customers at least cost, meeting the state’s pollution reduction goals, improving the state economy and creating jobs.’’

Beyond the energy savings, the program — by providing upfront capital – allows the participating facilities, which often face fiscal constraints, to [link:|
spend money on things more in line with their core mission].

PSE&G has been talking with state regulators for months about extending the program. Ralph Izzo, president, chief executive officer and president of Public Service Enterprise Group, the owner of the utility, hinted that a filing was imminent last week when he mentioned a $100 million energy efficiency initiative during the company’s quarterly earnings call.

The latest proposal includes a new wrinkle, assessing a 1.5 percent fee to recover some of the revenue the utility will lose by helping customers reduce energy use. The fee would be paid by the participating facility, PSE&G said.

“It’s not all of the lost revenue, but it’s important to address the lost sales issue if we are going to keep growing the business,’’ Melanson said.

For ordinary ratepayers, the program, if approved by the BPU, will have negligible impact on their bills, according to the filing. The typical residential gas customer would pay 56 cents more annually while the average residential gas bill will increase by 48 cents a year. Over a19-month period, electric rates would increase by $4.8 million and gas rates by $1.8 million, the filing said.

Under the proposal, $30 million would be allocated to energy efficiency programs at multifamily units, a market the utility and others say has been underserved. Lowering energy costs in these buildings where many low-income families live can have a significant impact – low-income people can spend up to 20 percent of their income on energy costs, compared to only 4 percent for the average household, according to the NRDC and Sierra Club.

The biggest chunk of money — $40 million — will be spent on programs at hospitals. Healthcare facilities are a high-energy use sector with an aging and inefficient energy infrastructure, according to Melanson. The efficiency projects at hospital also tend to be the most expensive, running from $1 million to $2 million, and, in some cases, even higher, he said. Projects at multifamily units typically cost between a half-million dollars and $1 million, he added.

The program also would spend $25 million for energy efficiency projects at government facilities, such municipal buildings, and nonprofit organizations. For the first time, too, the utility is asking the board to include small businesses in the program, according to Melanson.

The rest of the money would go to administrative expenses ($13.7 million) and for IT system enhancements ($1.1 million).

In the filing, PSE&G projected that the program would begin in March 2015, if approved by the BPU.

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