The impact of climate change compels new and better approaches to how the nation provides and uses energy, according to Ralph Izzo, chief executive officer, president, and chairman of Public Service Enterprise Group.
In a speech this past week to the Somerset County Business Partnership at Duke Farms, Izzo said the state’s energy infrastructure requires major updating — given the huge developments in technology and lifestyles against the backdrop of a changing climate.
‘’Our infrastructure wasn’t designed for the rapidly changing climate we now have,’’ said Izzo, whose company owns New Jersey’s largest gas and electric utility, Public Service Electric & Gas, which supplies three out of every four people in the state.
In a theme he has often mentioned recently, utilities have to adapt to changing technologies and recognize that their business paradigm must change from one in which they are financially rewarded when customers use more energy.
“This made eminent sense 50 years ago, but it is precisely the wrong incentive in 2014,’’ Izzo said. Instead, he urged for new regulations to invest in energy-efficiency improvements to help customers reduce their bills — even if rates go up.
For utilities and customers, that is a win-win proposition, he said. “We can come out ahead if energy-efficiency investments lower our costs more than they decrease our revenues,’’ Izzo said.
PSE&G has been aggressively promoting energy efficiency before the New Jersey Board of Public Utilities, with the agency now considering a $110 million investment by the company to help hospitals, government agencies, and multifamily units to reduce their energy costs. If approved by the BPU, the utility’s investment would be about $300 million.
Utilities also face challenges given the increased use of so-called distribution generation, which reduces the amount of electricity they deliver to their customers. In his speech, Izzo noted the majority of new installed generation capacity in the nation is now solar.
“Demand for electricity is flat to somewhat down,’’ Izzo said. “This means we can no longer rely on an ever-increasing volume of sales to cover the large, ongoing investments needed to maintain the grid at a high standard of reliability.’’
How to recover those costs, however, remains a point of dispute. The Legislature is expected to take up a bill, yet to be introduced, ‘’suggesting revenue decoupling.’’ The new system would allow utilities recover the cost of maintaining their systems — even if their volume of sales fall — by other rate adjustments on customers’ bills.
Izzo argued the highest priority should be energy efficiency — a policy the environmental community embraces. It also questions why the utility is then spending billions of dollars in upgrading its high-voltage transmission lines and other traditional utility infrastructure projects.
“Utilities can be instrumental in closing the energy-efficiency investment gap, putting to work our low-cost capital, our brand and customer relationships, and our focus on serving everyone,’’ he said.
Utilities can play a major role in expanding access to energy efficiency, Izzo said. “I believe utility involvement can go a long way toward moving our nation from 13th place in energy efficiency to first place where we should be — and with New Jersey in the forefront,’’ he said.
“In conclusion, we believe utilities are essential to ensure universal access to newer, cleaner energy options,’’ he said. “But our ability to do so depends on strong partnerships and new collaborative efforts, more than ever before.’’