Explainer: SBC — A Well-Intentioned Surcharge All Too Easy to Divert

Tom Johnson | March 1, 2016 | Explainer
Rather than funding clean energy as intended, the revenues from societal benefits charge have been used like an ATM by the administration and legislators

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For much of the past decade, legislators and administrations have used a surcharge on customers’ electric and gas bills as their very own ATM. When in doubt, divert funds from the societal benefits charge (SBC) to plug a hole in the state budget or finance new or existing programs. It is happening once again under a bill (S-104) to establish a new “Green Fund’’ to finance energy reliability and resiliency projects, a top priority given widespread and lengthy power outages resulting from bad storms. But can the so-called SBC stand another hit?

The history: Enacted in 1999 as part of a restructuring of the energy sector, the SBC was created as a tradeoff to help get the deregulation bill through the Legislature. It divvied up a pot of money for a variety of well-intended purposes — primarily to promote clean-energy initiatives and to help the poor pay utility bills. Utilities also won a cut: a source of funds to clean up contaminated coal gas plants, to decommission nuclear power plants, and to compensate for unpaid bills from delinquent customers.

What it does: Originally designed as a small surcharge on bills, the fund now raises close to a billion dollars a year ($910 million in fiscal year 2014). For the typical residential customer, the charge is not huge, averaging approximately $73 annually for electricity use and $89 for gas use, according to the Office of Legislative Services. For businesses, the cost is much steeper, especially since their bills are tied to how much energy they use, and can run as high as $1 million a year.

What’s not to like: With so much money raised by the surcharge, it has proven irresistible to lawmakers and administrations with other priorities. Since Gov. Chris Christie took office, the state has diverted more than $1 billion in societal benefit charges to the general fund, a practice some liken to a hidden tax. The latest proposed budget offered by the governor this past month would siphon at least $112 million to pay for energy bills at state government buildings and New Jersey Transit.

Who complains about the diversions: Just about everyone — clean-energy advocates, business lobbyists, and even legislators. But when the budget has to be struck, the money and diversions usually continue. Last year, Democrats even sought to pull $20 million out of the clean-energy fund to pay for maintenance and salaries at state parks, a provision line-item vetoed by the governor.

What’s to like: Even with the diversions, the surcharge still set aside about $216 million in the current budget to pay for clean-energy programs, 80 percent of which was allocated to energy-efficiency projects. Those programs help residents and businesses reduce electric and gas bills by using less energy. The other major use of the fund is to provide low-income households with assistance in paying their energy bills under a program that ensures that no more than 6 percent of household income goes for that use. In recent years, the cost of the program has exceeded $200 million or approached that level.

What lies ahead: Probably more diversions, given the chronic holes popping up in the annual state budget. The Christie administration has said it would like to reduce the cost to ratepayers by turning it into a revolving fund that would be replenished by loans given out by the programs. A special task force appointed by the administration, however, largely panned that approach as unworkable. No major changes in the program are anticipated.