PSE&G Poised to Invest $69M in Energy-Efficiency Program

Tom Johnson | July 31, 2017 | Energy & Environment
But state’s largest utility could spend much more, if allowed to decouple sales from distribution

energy efficiency
Public Service Electric & Gas reached a tentative agreement last week with the state on a $69 million energy-efficiency program, but it reflects only a fraction of what the utility wants to spend on efforts to reduce electric and gas use —as well as on other initiatives.

The utility plans to file with the New Jersey Board of Public Utilities a much larger energy-efficiency program early next year, but before then, it will request long-sought regulatory changes in current rules, which executives say discourage more extensive investments in such programs.

The filing, to be made in a rate case mandated by the BPU, is just part of an ambitious agenda by PSE&G that involves seeking approval of a five-year $2.7 billion gas modernization program (announced Thursday) and up to $200 million to $300 million in new investments to bolster its distribution system in an extension of its Energy Strong program (to be filed later this year).

Nuclear subsidies

Public Service Enterprise Group, the utility’s parent, also is lobbying policymakers and legislators for subsidies for its three nuclear power plants, which the company argues are facing fiscal problems because of competition from low-priced natural-gas plants. If approved, ratepayers will pay for the subsidies.

Ralph Izzo, the CEO, president, and chairman of PSEG, discussed the proposed investments during the company’s quarterly earnings call Friday and then later with reporters. “There’s a lot going on at the utility in regulatory matters,’’ he said.

The intention to invest in the various programs has been suggested in the past, but Izzo’s disclosure that the company would seek approval of a decoupling provision from the BPU this November was new. Decoupling is a way to ensure utilities bring in enough revenue to maintain their infrastructure.

Twenty-nine states have adopted some sort of decoupling mechanism, often to encourage utilities to invest in energy efficiency even though it erodes their revenue by decreasing gas and electric sales. The issue has been debated for years before the BPU and the Legislature, but no consensus has been reached. Two of the state’s gas utilities have approved decoupling programs.

PSE&G’s decoupling request

“PSE&G, as part of the filing, will request approval for a decoupling of distribution revenue from sales volume to support large energy investments,’’ Izzo told analysts. “We believe strongly that this latter action will incentivize investments in energy efficiency and help lower participating customers’ bills.’’

The proposal is way to allow energy efficiency to “really take hold in the state,’’ said Izzo, who long has talked about ramping up the utility’s investments in energy efficiency. To date, PS&EG has spent roughly $400 million on such programs, not counting the program pending now before the BPU.

In a stipulation signed by the board’s staff and the New Jersey Division of Rate Counsel, the utility would be able to spend $69 million on its current energy-efficiency program. The BPU commissioners still must approve the settlement.

Under the agreement, $20 million would be allocated to multifamily housing projects, $25 million to hospitals, $15 million to governments and nonprofits, and $9 million for a new program to install smart thermostats in residences.

Izzo declined to say how much the new energy-efficiency program will spend, only admitting “it will be big.’’

That is keeping with the company’s plan for the utility, which plans to spend $3.4 billion on its capital program for its transmission and distribution system in 2017. “The strength of the company, and its growth, is clearly at PSE&G,’’ Izzo said. In the past, the executive has talked about investing up to a billion dollars in energy efficiency — given the right regulatory framework.