Customers Can Expect Higher Bills as Utilities Collect Restoration Costs

Tom Johnson | October 23, 2014 | Energy & Environment
The price tag for getting homes and business back online after the recent run of extreme weather: $1.25 billion

Union Beach's storm-damaged doughboy statue is back in place after extensive repairs.
New Jersey utilities prudently spent $1.25 billion in storm-restoration costs over the past few years, money that in some cases is already being recovered from customers or that will be in the form of higher bills.

The total is not surprising given the extent of damage many utilities incurred during a wave of unusually destructive storms in the past few years. This extreme weather ranges from hurricanes Irene and Sandy, a rare October snowstorm, and a devastating thunderstorm (a “derecho’’) in June 2013 in South Jersey.

The costs to be added to customers’ bills, however, come at a time when consumers and businesses also face higher charges because of efforts by the state Board of Utilities to improve the resiliency and reliability of the power grid. After Hurricane Sandy, more than 2 million were left without power, some for up to two weeks or more.

Beefing up the grid will not be cheap. Public Service Electric & Gas won approval from the agency earlier this year to invest $1.2 billion in a program to harden its infrastructure to promote resiliency. Other utilities are undertaking similar, but less-expensive projects to achieve the same goals, increasing reliability and reducing power outages to customers.

Of the $1.25 billion in storm restoration costs approved by the BPU, three utilities already are beginning to recover these expenses, according to Jerry May, director of the agency’s Division of Energy. They include Atlantic City Electric ($70 million); South Jersey Gas ($736,000); and Rockland Electric ($31.2 million), May said.

Other utilities’ storm restoration costs will be folded into future rate cases, including an ongoing proceeding involving Jersey Central Power & Light, he said. The board yesterday approved $736.1 million in storm restoration costs for the utility, which is owned by Akron-based First Energy Corp.

PSE&G will recover $366.3 million in a future rate case, as well as New Jersey Natural Gas, with costs totaling $48.7 million. In reviewing the prudence of the utilities’ expenditures, the agency disallowed $10 million for all of the utilities seeking to recover those expenses, May said.

Roughly half of the utilities’ costs — about $600 million — were for capital expenditures. Because of the extensive damage caused by the storms, there was a need for substantial replacement of poles, wires, and other equipment, according to May. The rest of the expenditures deal with operation and maintenance costs incurred during the storms, he said.

“We are putting in a newer and more reliable system than we had before,’’ May said.

BPU Commissioner Joseph Fiordaliso agreed. “We have a stronger infrastructure today than we did two years ago.’’

“Can we eliminate outages? No. But maybe we can make them shorter and less frequent,’’ he added.

New BPU President Richard Mroz noted that the agency is moving to a new phase in trying to improve reliability, citing an ongoing proceeding in which the board is looking at ways to increase the resiliency of the power grid. Earlier this week, a consultant said the agency has to gather more information from utilities to determine the most cost-effective ways to improve the resiliency of the power grid.

Beyond improving the power grid and its reliability, the agency also is working to fund a new Energy Resiliency Bank that would enable critical facilities — such as wastewater treatment systems and drinking-water plants — to remain in service even it the power grid fails. It is initially targeting $65 million in federal funds to help develop alternative power systems to be available in the event of extreme storms.