Power Auction Could Mean Lower Electricity Prices for Ratepayers in New Jersey

Tom Johnson | February 9, 2015 | Energy & Environment
Cheap natural gas only one factor in possible price drop; outstanding actions against one utility and parent-company merger could also help

transmission towers
By the end of this week, residential and business customers will learn if they’ll be paying more or less to keep the lights on beginning in June.

The state Board of Public Utilities is currently conducting an online auction that will determine how much the four electric utilities will pay for the power they need to supply customers who do not switch to alternative energy suppliers. The auction, which began last week, is expected to end in the next few of days.

The steep drop in natural gas prices over the past few years, which often sets how much power suppliers earn for the electricity they produce, has generally led to lower prices — particularly for most residential customers in the past few years.

The auction is held every February and state officials view it is as helping to reduce energy bills — even as other factors, such as increased costs to utilities to make their systems more resilient and to upgrade their high-voltage transmission lines have pushed electric bills higher.

Unlike the cost of delivering power over local distribution lines from substations to homes and businesses, however, the state does not regulate the cost of generating electricity — ever since it deregulated the energy sector in 1999. That accounts for the bulk of the cost consumers and businesses pay.

Last year, three of the four state utilities saw electricity prices drop for residential customers who have opted to remain with those companies to buy the power they need. The lone exception was Public Service Electric & Gas, which boosted rates paid by residential customers by about 1 percent. PSE&G is the state’s larges utility with1.8 million electric customers.

Officials blamed the higher costs for PSE&G customers on increased investments in transmission lines deemed necessary by the operator of the regional power grid to maintain reliability of the system.

Prices at the state’s other electric utilities dropped as much as 2.75 percent for the half-million customers of Atlantic City Electric to 0.7 percent for the 66,000 customers of Rockland Electric in northern New Jersey. Jersey Central Power & Light’s 1 million customers saw costs drop by 1.7 percent. All of those numbers apply to only residential ratepayers.

For larger commercial and industrial customers who have switched to alternative energy suppliers since the state deregulated the energy sector, the outcome of last year’s auction proved to be more advantageous, with even bigger decreases in electric bills.

But whatever the outcome of the auction, it could be affected by other factors before the BPU. For JCP&L, there is an ongoing rate case in which an administrative law court judge ruled the state’s second-largest utility should reduce its revenues by $107 million.

PSE&G also is seeking to invest more than $100 million in money to be recouped from ratepayers in new energy-efficiency programs, which will offset the increases in bill for customers participating in the program.

Atlantic City Electric customers may see their bills drop even sooner. Under a proposed settlement to be taken up by the BPU at its monthly meeting Wednesday, the utility’s customers could receive rate credits totaling $62 million if a proposed merger between its parent company, Pepco Holdings Inc., and Exelon Corp. is approved by the agency.

The merger deal, however, still needs to be approved in other jurisdictions where there is much more opposition from state and consumer advocates.