Opinion: The BPU Could End Diversions from Clean-Energy Fund in a Heartbeat

R. William Potter | May 16, 2016 | Opinion
It’s disingenuous to pretend that Christie’s shanghaiing of $1B in funds hasn’t had a deeply deleterious effect on the state’s clean-energy industry

Credit: Amanda Brown
R. William Potter
A recent article in NJ Spotlight, “BPU Boss Grilled by Senate Committee About $1 Billion in Diverted Funds,” shines a much-needed light on the Christie administration’s annual practice of dipping into the Clean Energy Trust Fund (CETF) and diverting more than $100 million a year to help pay the state’s utility bills and the administrative costs of “the BPU’s office of clean energy,” among other questionable uses.

Since 1999 when the legislature voted to authorize the breakup of the electric utilities, these clean-energy funds have been, and remain, statutorily dedicated to promoting energy efficiency and renewable-energy projects, not to underwriting the general cost of government operations.

As noted in the article, the clean-energy fund “is supported by a surcharge on utility customer bills,” called the societal benefits charge, or SBC, “which amounted to at most $56.67 annually for the average electrical user and $89.10 for the average gas user,” more or less depending on customer usage.

The Christie administration’s practice of treating the SBC trust fund like any other state revenue source has effectively transformed this clean-energy fund into just another state tax. And sadly, the legislature has gone along with this practice, after protesting sometimes loudly but then quietly voting to incorporate the diverted funds into the general budget.

All of which raises this question: How does the state get its hands on this particular surcharge collected by the utilities as an add-on in ratepayers’ monthly bills? The state’s energy utilities have been imposing and collecting “surcharges” of one kind or another for decades. But only the clean-energy portion of the SBC is subject to these costly diversions from their statutory mission.

For an explanation we scroll back to the first years of the SBC created by Section 12 of the 1999 “Electric Discount and Energy Competition Act” (EDECA).

At that time and for the next few years BPU regulators directly administered the SBC funds, awarding often lucrative rebates to underwrite a vast array of worthy energy efficiency projects and to jump-start the renewable-energy industry — especially solar — in New Jersey.

By all accounts this process was wildly successful — with the utilities collecting the surcharge and the BPU telling them how to spend it — quickly boosting New Jersey into the upper ranks of states promoting conservation and solar power . For a time, the Garden State was second only to California as a crucible for clean-energy development.

Then came some very public allegations by a disgruntled BPU employee who claimed that the SBC money was being handed out to undeserving solar energy companies and to individuals, which sparked a Department of Treasury audit that found no wrongdoing.

But the damage had been done. The BP U leadership was so rattled by the unfavorable publicity that it wanted to wash its hands of direct accountability for the money. As a result, in early 2005, the BPU signed an interdepartmental agreement (IDA) with the Treasury Department whereby SBC money was deposited in the newly created Clean Energy Trust Fund to be administered by treasury officials acting as the BPU’s “fiscal agent” for the proper accounting and disbursement of SBC funds to eligible projects in strict accordance with the statutory purposes of the SBC.

In other words, the SBC was intended to be run much like any other trust fund: The utilities would deposit a portion of the SBC funds paid to them by ratepayers in a special clean-energy account managed by the Treasury Department, which acts as a bank’s trust department, responsive to directives from the trustees, the commissioners of the BPU.

Importantly, the IDA provided that it “may be terminated at any time by either party in its sole discretion by written notice to the other.”

So, if they wanted to, the five BPU commissioners — three Republicans and two Democrats — could safeguard these utility ratepayer funds from any seizures by simply informing Treasury that the IDA is hereby terminated and by directing the return of clean-energy funds to the escrow accounts of the public utilities that collected them.

Why hasn’t the BPU invoked this termination clause to protect the SBC and ensure that it finances only energy efficiency and renewable-energy projects, thereby saving vast amounts of energy, while protecting the environment and supporting employment gains in the clean-energy industry, as the 1999 law envisioned when the SBC was created?

The diversion to date of more than $1 billion into the general state treasury could have financed a rich harvest of “nega-watts” of electricity saved and “nega therms” of natural gas conserved. Assuming a cost of $2,000 per residence receiving comprehensive energy-efficiency improvements, $1 billion could have financed the weatherizing of an additional 500,000 New Jersey homes.

But when BPU President Richard Mroz testified in response to Sen. Linda Greenstein’s question as to what effect this billion-dollar diversion has had on efforts to conserve energy — dropping New Jersey recently from “the top 10 nationally to 23rd,” citing an energy efficiency association rating of the states — he replied that the state “has and continues to have a robust energy efficiency program that is meeting our needs and reducing emissions.”

Really? I guess we didn’t need the economic and environmental benefits that an additional $1 billion could have provided. State legislators need to probe more deeply before approving yet another $120 million diversion.

(Full disclosure: My law firm represented the MidAtlantic Energy Industry Association (MSEIA) in a challenge to the Christie administration’s diversion practice that the Appellate Division rejected. We also filed a petition with the BPU to invoke the “termination clause” in the IDA, thereby protecting clean-energy funds from further seizures, which the BPU also rejected.)