Jersey Central Power & Light’s plans to spin off a major part of its business into a separate company suffered a setback yesterday when state regulators denied a vital component of the transaction.
The decision by the New Jersey Board of Public Utilities has implications on how much oversight it would retain over the new entity, a standalone transmission company, and perhaps whether the utility’s parent, FirstEnergy, goes ahead with the proposal.
The Akron, Ohio-based energy conglomerate filed a petition with the state last year to spin off the transmission assets of JCP&L into a separate company, a step it has already taken with utilities it owns in other states.
The BPU ruling affects only one aspect of the proposal — that the new transmission company be declared a public utility in New Jersey. But the board, relying on legal advice from staff and the Attorney General’s office said the transmission-only company could not be defined as a “public utility’’ based on a reading of the state’s 17-year-old law deregulating electric utilities.
The distinction is important because if the new entity, dubbed the Mid-Atlantic Interstate Transmission (MAIT) LLC, is not a public utility, the BPU would retain the limited jurisdiction it now has over such matters as vegetation management of high-voltage power lines in the utility’s territory.
Perhaps more importantly, the new transmission company would not have the power of eminent domain in acquiring land it needs to build new or expanded high-voltage power lines. It also no longer would have the right to petition the BPU for approval of a selected route, and instead would have to secure approval from each of the municipalities it traverses — a more burdensome and time-consuming undertaking.
“There’s a reason why MAIT wanted to be designated a public utility,’’ said Stefanie Brand, director of the New Jersey Division of Rate Counsel, which had urged the board to decide whether the new transmission could be declared a public utility under state law. “Do they want to go forward without the ability of eminent domain?’’ Brand asked as an example.
[related]BPU President Richard Mroz decided to bring the public utility issue before the full board because of its potential ramifications. “It was my judgment it was a matter of significance because it could affect whether the applicant proceeds with the matter,’’ he said.
JCP&L, the state’s second-largest electric utility, with more than 1 million customers, gave no hint what it will do following the ruling. “The company will review today’s ruling prior to determining our next steps,’’ said Ron Morano, a spokesman for the utility.
Morano noted that the Federal Energy Regulatory Commission approval the proposal last week, and a filing regarding spinning off two of FirstEnergy’s utilities in Pennsylvania is pending before regulators there. The federal agency determines what companies earn on their transmission assets.
In the past few years, transmission has become a larger portion of the customer’s utility bill as part of a nationwide effort to modernize the country’s electric grid. Utilities typically earn a higher rate of return on investments in transmission than on their distribution systems.
“We continue to believe that MAIT provides the most-efficient, cost-effective manner for investment in new transmission projects to enhance service reliability for JCP&L customers,’’ Morano said.
For the state, having the transmission piece remain a part of JCP&L along with its distribution system, allows regulators to retain some jurisdiction over safety and reliably issues. ‘’If it’s not a public utility, we’d have more concerns about the proposal,’’ Brand said. “I’m troubled by the aspect of selling off of assets without BPU having any control.’’
JCP&L has had an up-and-down relationship with state regulators in recent years, primarily over its response to widespread power outages in its territory. And last March, the BPU cut the utility’s revenue, after rate counsel argued it was overcharging customers.