Over 1 Million Customers Stand to Gain from Decision on JCP&L Rates

Tom Johnson | January 12, 2015 | Energy & Environment
Administrative law judge rules that Jersey City Power & Light must reduce revenue by more than $100 million

JCP&L Logo
In a long-awaited decision, an administrative law court judge recommended
that revenue collected by Jersey Central Power & Light be reduced by $107 million, a cut that could have significant impact on the bills paid by more than 1 million customers of the utility.

The ruling, stemming from a petition brought by the state Division of Rate Counsel three years ago, now will be taken up the New Jersey Board of Public Utilities, which can modify, reject, or accept the judge’s decision. That is not expected to happen until sometime this spring.

The judge’s recommendation falls short of what the BPU and Rate Counsel recommended in cutting down the amount of money the utility collects from its electric customers. Initially, both agencies sought to trim JCP&L’s revenues by more than $200 million, but later adjusted those proposals to $170 million and $190 million, respectively.

Nevertheless, the size of the rate reduction — in a case where the utility was seeking to increase its rate base by $31.47 million — is notable. Typically, utilities garner about half of the rate increase they seek from the BPU in filings..

“In general, I don’t think it is what the company wants,’’ said Paul Patterson, an energy analyst at Glenrock Associates in New York. “It is sizable and it is unusual.’’

Still, the decision, if upheld, fails to include approximately $85 million in storm restoration costs already approved by the BPU. Those will eventually be passed on to customers, although it is not yet determined when and how.

“The AJL [administrative law judge] recognized that the company is spending adequately to maintain the JCP&L system, improve reliability, and operate effectively and also noted improvement in communications with customers,’’ said Ron Morano, a spokesman for the utility.

From 2203 to 2012, JCP&L has invested approximately $1.2 billion in new electric distribution plant and utility services equipment, according to the judge’s decision. Critics have long argued that the company is spending less than it needs to maintain the reliability of its system, which has experienced numerous and long outages over the past few years.

“JCP&L disagrees with the AJL’s decision on certain matters and the company will file a response on several key issues.’’

Division of Rate Counsel Stefanie Brand, however, lauded the decision. “It’s a significant reduction for ratepayers,’’ she said.

Brand petitioned the BPU to open a new rate case for the utility, arguing it was earning more than what state regulators set. The petition came after a series of extreme storms that left many of JCP&L’s customers without power, sometimes for a week or more.

The judge, however, rejected a proposal that the state’s second-largest utility spend more money investing in its utility infrastructure. That would allow JCP&L to add to its rate base, collecting more revenue from customers.

Brand supported that decision. “As far as we are concerned, JCP&L has an obligation to spend what they need to do to maintain the reliability of the system,’’ she said.

How much ratepayers will benefit from the decision is still uncertain, primarily because the BPU still needs to decide what its ruling will be. When both agencies were seeking more than $200 million in reductions from the utility, projections were it could cut customers’ bills by as much as one-third.

Consumer advocates have been unhappy with the delays in deciding the case, which they believed would ultimately lead to reductions in customers’ bill.

Other issues were left unresolved by the judge’s ruling, including a decision on consolidated tax returns. A new policy adopted by the BPU late last year would shift most of the savings energy companies earn from filing consolidated tax returns from utility customers to the parent holding company.