Senate Bill Package Could Fundamentally Change the Power Sector

Draft legislation could alter utilities’ business model, introduce aggressive goals for solar energy

State Sen. Bob Smith (D-Middlesex)
The state’s energy sector could undergo fundamental changes in the way it operates under a package of bills being considered by legislators.

The bills would call for a much more aggressive effort to promote renewable energy, particularly solar, and would no longer link a utility’s revenue to the amount of gas and electricity sold to a customers, a process known as “decoupling.’’

If the state is going to promote renewable energy on a wider scale — one of the proposed bills sets a goal of having at least 80 percent of New Jersey’s electricity coming from such sources by 2050 — and convince consumers and businesses to use less energy, many say utilities will have to change their business model.

“It’s a substantial restructuring of the energy business,’’ said Lyle Rawlings, president and CEO of Advanced Solar Products, who has been lobbying for more aggressive renewable energy targets for months and also supports the concept of decoupling.

Those bills are probably the most important part of a package to be considered by the Senate Environment and Energy Committee. They have yet to be introduced, but could be by the end of the month,

How far the bills will advance is in doubt. The Christie administration has resisted efforts to increase the state’s renewable energy goals, which by legislation require 22.5 percent of the state’s electricity to come from clean-energy sources.

With the rapid growth in the use of renewable energy to meet customers’ electricity needs, a rise in localized sources of generation that are off the power grid, and increased focus on using less energy, utilities are experiencing a dropoff in revenue from their traditional profit centers. So much so, that utility executives and industry trade groups acknowledge that those trends pose a financial threat to the sector.

The rationale behind decoupling is that it gives utilities a bigger incentive to invest in alternative-energy programs — provided it does not hurt their bottom line — by allowing them to recover lost revenue if they can demonstrate they are saving their customers money.

Not everyone agrees. The New Jersey Division of Rate Counsel has argued decoupling is not the best way to provide incentives to utilities to invest in energy efficiency or renewable energy. Others, including the New Jersey chapter of AARP, say it could result in higher rates for consumers because sometimes energy consumption drops because of weather or a sagging economy.

Some also question the rapid rampup in requiring renewable energy to supply much of the state’s electricity.

“We just think it’s too aggressive, too soon,’’ said Fred DeSanti of the New Jersey Solar Energy Coalition, who supports efforts to set more ambitious goals for use of solar. He argued the state should not adopt such targets until it knows about interconnection issues and costs.

“I don’t think the utilities can sustain putting that kind of capacity in,’’ he said, referring to the ramped-up requirements for solar. Accommodating solar into the power grid often requires utilities to invest in to make sure electricity flows smoothly in both directions — from traditional power plants and from solar systems installed on homes and businesses.

Another bill in the package also could increase the use of solar systems. It would revamp the provisions of an arcane rule governing net metering — which allows customers who generate electricity from solar arrays to send the power they do not use back into the power grid.

Currently the regulations set a limit of 2.5 percent of power from solar systems going back into the power grid. The new bill would raise the limit to 7.5 percent, according to Sen. Bob Smith (D-Middlesex), the chairman of the committee.

Other measures would try to deal with reducing greenhouse gas emissions, including one requiring the state Department of Transportation to implement a law requiring the state to reduce greenhouse-gas emissions by 80 percent by 2050. The transportation sector is the biggest source of pollution that can spur climate change.

Another measure urges the federal government to address methane leaks from natural gas pipelines. Methane is a particularly potent source of greenhouse gas emissions.

The package also includes a bill that would direct local planning boards to incorporate smart-growth initiatives and storm resiliency into municipal land-use plans when they are revised.