JCP&L Takes Another Run at Spinning off Transmission Assets

Tom Johnson | July 27, 2016 | Energy & Environment
Company adds five current commercial distribution customers to spinoff, hoping to qualify as public utility with power of eminent domain

JCP&L Logo
Jersey Central Power & Light is still trying to win regulatory approval to spin off its transmission assets into a separate company.

In an amended petition, the state’s second-largest electric utility is slightly modifying a previous proposal rejected earlier this year by the New Jersey Board of Public Utilities.

In denying the spin-off, the board balked mainly on arcane grounds that a company that dealt solely with transmission did not meet the state’s definition of a public utility because it did not include any distribution assets.

The distinction is important because failing to qualify as a public utility meant the new spinoff would not have the power of eminent domain in acquiring land it needs to build new or expanded high-voltage power lines. It also would not have the right to petition the state for approval of a selected route, and instead would require local agreement from towns it would traverse.

To win approval, the utility changed its original petition to add “certain distribution assets’’ to qualify as a public utility according to the state’s definition. The assets to be added to the new entity, dubbed the Mid-Atlantic Interstate Transmission Co., would be five substations serving five current commercial customers of JCP&L.

The new proposal raises concerns for New Jersey’s Director of Rate Counsel Stefanie Brand, who had issues with the initial petition to spin off the transmission assets, which are valued at $750 million, according to the utility’s filing.

“It can’t be as simple as that,’’ Brand said, referring to the plan to add five retail customers from the existing distribution system to the new transmission entity. “All you have to do is give away a few customers and now you have the power of eminent domain,’’ she asked.

“It raises a lot of questions,’’ Brand said, adding her office expects to file a brief on the filing early next month. “It’s very complicated.’’

In the past few years, transmission has emerged as a bigger portion of a customer’s monthly bill, in part due to a nationwide effort to modernize the country’s electric grid and make it more reliable. Utilities are eager to do so because they typically earn a higher rate of return on investments in transmission lines than on their distribution systems.

The latest filing by JCP&L echoes previous claims that the new entity will have significant benefits for customers, including accelerated investment in New Jersey, creation of jobs, and increased reliability. In addition, the formation of MAIT will reduce borrowing costs by $135 million, more than half of which will occur in New Jersey, the utility said.