Utility Investments in Natural-Gas Infrastructure Will Mean Higher Prices

Tom Johnson | November 16, 2015 | Energy & Environment
Residential customers of New Jersey Natural Gas could see monthly bills jump by 24 percent -- but probably not before 2017

PSE&G workers in Totowa are replacing aging cast-iron and steel mains with new plastic pipelines.
The bill to modernize the state’s aging natural-gas infrastructure is coming due.

On Friday, New Jersey Natural Gas filed a petition with the state Board of Public Utilities to increase its charge for delivering fuel to homes and businesses by $148 million — an amount that will increase the typical residential bill by 24 percent or $21.69 more a month, if approved.

Today, the BPU is scheduled to act on a separate settlement its staff reached with Public Service Electric & Gas to spend $905 million to expedite the replacement of aging gas pipes.

The expenditures reflect a consensus between state regulators and gas utilities to embark on significant new spending to upgrade their infrastructure, an agreement based in part on historically low prices for natural gas, which ease the impact on consumer heating costs.

Customer of both utilities will not see any immediate impact on their bills. PSE&G will not raise rates until 2017, when typical residential bills will increase by 49 cents per month. At the end of the three-year program, bills will rise by $4.82 a month.

New Jersey Natural Gas customers will not see any increase in this winter’s bills, given the typical regulatory-review process, which lasts up to 10 months, according to the utility. Actually, annual bills are expected to be 17 percent lower, as a result of a previous bill-credit implemented by the utility because of lower gas prices.

[related]Typically, when a utility files for a rate request, the BPU pares down the increase. In the PSE&G case before the board today at its regular monthly meeting, the Newark utility originally filed for a $1.6 billion spending-program last March.

New Jersey Natural Gas has not filed for an increase in its delivery rates since 2007, according to the company. From 2008 through 2015, the utility has invested $806 million in its natural-gas transmission and distribution system. The expenditures include customer growth and system improvements, replacements, and retirements.

“The investments we make strengthen our system and provide greater reliability to our customers and the communities we serve,’’ said Laurence Downes, chairman and CEO of the Wall Township-based utility.

Hurricane Sandy caused extensive damage to the infrastructure of New Jersey Natural Gas, leading the BPU to direct it and other utilities to assess their storm-mitigation efforts.

A consumer advocate expressed concern about the size of the proposed rate increase sought by the utility.

“It’s steep for folks — especially for those living on moderate and fixed incomes,’’ said Evelyn Liebman, associate director of advocacy for AARP in New Jersey. “We do care about reliability and safety so consumers can expect to see rate increases.’’

In the PSE&G case, the $1.6 billion initially sought by the utility was trimmed down in a settlement that both AARP and the New Jersey Rate Counsel agreed to.

If approved by the BPU, the utility plans to replace 510 miles of cast-iron and unprotected steel gas mains and 38,000 service lines to homes and businesses over a three-year period. Previously, the state approved $300 million of new investment in its gas system as part of PSE&G’s Energy Strong program.