For JCP&L Customers, BPU Decision Means Small Dip in Monthly Bills

Tom Johnson | March 19, 2015 | Energy & Environment
Board pairs decision to reduce rates with one letting utility collect storm-restoration costs from Sandy, so customer savings smaller than expected

Credit: Governor's Office/Tim Larsen
Richard Mroz, president of the state's Board of Public Utilities
Jersey Central Power & Light’s customers will see electric bills drop a bit, but the reduction is far less than what the state originally sought because the utility’s rates will soon include storm-restoration costs from Hurricane Sandy.

In a pair of decisions, the New Jersey Board of Public Utilities decided that revenues for the state’s second-largest electric utility should be reduced by roughly $115 million, but much of that will be offset by the $80.7 million it will now recoup annually from customers — money it spent to restore power during the 2012 storm.

Sandy, the worst storm in state history, left 90 percent of the utility’s customers without power, many for a week or more.

The net impact of those decisions is to cut JCP&L’s revenue by roughly $34 million, which translates into a drop in customers’ bills of about $1.68 a month. While disappointed in the size of the rate cut, critics of the company said the action affirms a contention by the state Division of Rate Counsel that the utility was overcharging its more than 1 million customers.

Without the storm restoration costs, customers’ bills would have dropped by $5.74 each month.

“I’m glad it’s a decrease. I’d like it to be more,’’ Rate Counsel Director Stefanie Brand said, whose office first raised allegations that the utility was collecting more than allowed from its customers some three-and-a-half years ago.

“It’s better that rates are going down instead of going up,’’ agreed Ev Liebman, associate director of New Jersey AARP. She also welcomed other aspects of the decisions, citing plans to initiate a review of the utility’s operations and management, as well as requiring JCP&L to file another base-rate case by April 2017.

Still, the BPU’s actions left critics of the company somewhat deflated; for example, the agency decided not to roll back rates to August 1, 2014, as Brand and others had sought.

The agency’s determination to pair a decision to lower rates with one to boost bills is a typical strategy adopted by the board in utility cases. Usually it is done with the aim of lessening the impact of rate increases on customers. This time, it gave customers a slight drop in bills while blunting the effect of recouping over a period of years $580 million in storm-recovery costs.

Ron Morano, a spokesman for JCP&L, said the company has to study details of the board’s orders, which have yet to be made public.

“The biggest item for us is the ability to recover the storm-restoration costs,’’ he said. “Even with today’s decision, our rates are the lowest of any other electric utility in the state.’’

The utility, in its initial rate-case filing, sought a $31.47 million increase in revenue.

BPU staffers and commissioners also cited the importance of allowing the utility to recover those costs, which the agency already had determined were prudently spent. If not allowed to do so, JCP&L could face credit downgrades, which would increase borrowing costs (that would be passed on to customers) and greater difficulty in accessing capital, they said.

“It (JCP&L credit rating) is probably worse than the other utilities,’’ said Jerry May, director of the Division of Energy, who detailed the two settlements in a comprehensive and unusual two-hour presentation to the commissioners.

“Ultimately, it’s the ratepayer who could conceivably suffer,’’ said BPU Commissioner Joseph Fiordaliso, who called the settlement of the rate case and storm restoration issues “very fair.’’

As far as the rate case goes, it is quite a bit less than what both the BPU staff and the Division of Rate Counsel sought in hearings before a state administrative law court judge. The BPU argued for a $170 million reduction in revenue while Rate Counsel asked for a $190 million cut.

The administrative law court judge suggested a $107 million reduction in a decision reached in early January. He also rejected arguments that the company was failing to provide reliable service to customers.

Still, the board expressed continuing concern about the utility’s operations, which led BPU President Richard Mroz to order staff to come up with a plan to take a closer look at its operations and management.

“Even today, there are lingering concerns about operations and management of the company,’’ Mroz said.

All of the decisions were approved unanimously, with only BPU commissioner, Upendra Chivukula, recusing himself from the cases.