PSE&G Gets State’s Go-Ahead to Spend $95 Million on Energy Efficiency Initiative

New Jersey’s largest utility signs settlement pledging to curb energy consumption

Stefanie Brand, director of the New Jersey Division of Rate Counsel
It looks like Public Service Electric & Gas will be allowed to continue a popular program to help hospitals, multifamily units, government facilities, and nonprofits reduce their energy costs through energy efficiency.

The state Division of Rate Counsel, the staff of the New Jersey Board of Public Utilities, and the Newark-based utility on Monday signed a settlement that will let the Newark-based utility spend $95 million on a wide range of initiatives to curb energy consumption.

The agreement still needs to be approved by the BPU, but given that the major players in the rate case have all signed onto the settlement, it is likely it will be approved when it comes up before the board, possibly as early as this month.

The program, which also allows PSE&G to collect more than $12 million in administrative and IT enhancements, will be funded by all of the utility’s customers, but they will hardly notice the impact on their bills. The typical residential electric bill will climb by 40 cents a year. For the average residential gas user, the increase will amount to 64 cents annually, according to the settlement.

Not only will the program, which already has a long waiting list of applicants to participate in it, save facilities big money on their energy bills, but it also reduces air pollution and the greenhouse gases that contribute to global climate change.

Under the settlement, $35 million will be allocated to multifamily housing units; $45 million to hospitals; and $15 million to government and nonprofit facilities. The overall settlement is close to PSE&G original’s request for $109.8 million. Basically, the program provides participants with a combination of grants and no-interest financing, paid back by the facilities over from three years up to 15 years, depending on the terms of the agreement.

[related]PSE&G has been the most aggressive utility in the state in investing in energy-efficiency programs, a strategy that reduces the revenue it collects from customers because it reduces their gas and electric consumption.

The utility frequently has said it wants to invest more in such programs, but wants to make sure it recovers enough money to keep its gas and electricity infrastructure reliable.

While the settlement does not signal a new direction in how the utility recovers those costs, PSE&G was happy with the result.

“This is the first time an electric utility has gotten recognition of the lost sales,’’ said Jess Melanson, director of energy services for PSE&G. “We wanted recognition it hurts our bottom line when we succeed in saving energy for our customers.’’

Rate Counsel Director Stefanie Brand also was pleased with the settlement. “It’s a reasonable price for the services they will deliver,’’ she said, adding that the agreement also includes extensive monitoring to make sure the utility delivers what it promises in a cost-effective manner.

Melanson said the utility wants to keep the program growing. “We have been very clear that we want to grow it bigger,’’’ he said, while also making it profitable for PSE&G.

The state’s Energy Master Plan calls for aggressive efforts to promote energy efficiency, but many environmentalists question how effective it has been in reducing consumption of gas and electricity.