PSE&G Wants to Spend $4B on Clean Energy in Six Years

Tom Johnson | September 28, 2018 | Energy & Environment
Utility proposes range of investments that could make it leading force in state’s energy policy. Not everyone’s reassured by that prospect

Credit: PSEG
Clean energy
Public Service Electric & Gas yesterday filed a six-year, $4 billion-plus clean-energy proposal, a series of investments that could cement it as the dominant force in shaping the state’s energy policies.

The proposal is significantly bigger than investments that the utility initially outlined at an investor conference in June. And they now include a plan to spend nearly $800 million on smart meters, a technology widely used around the nation, but not in New Jersey.

The other elements of the filing are closely aligned with the Murphy administration’s clean-energy goals, particularly a proposal to spend $2.8 billion on about two dozen energy-efficiency programs, as well a plan to invest $180 million in a variety of energy-storage projects.

The final piece of the program seeks to spend $364 million in building the infrastructure to charge electric vehicles, including installing stations to charge plug-in cars in 37,000 residences.

That provision, along with the energy-efficiency program, are likely to be the most controversial since there is a competitive private market in place in both sectors. It begs the question, why should ratepayers be asked to pay for something when the private sector is willing to do it, according to Stefanie Brand, director of the Division of Rate Counsel.

‘…very troubled by it’

Stefanie Brand, director of the Division of Rate Counsel
“I’m very troubled by it. They are taking competitive markets and turning them into monopolies,’’ said Brand, citing a provision in the filing where the utility aims to be the exclusive agent for energy-efficiency in its territory.

The filing comes on the heel of a host of new initiatives by PSE&G, and its parent, PSEG. Earlier this year, the utility won approval to spend $1.9 billion modernizing its gas distribution system. It also has asked state regulators for approval to invest $2.5 billion in upgrading its electric system.

Next week, the state Board of Public Utilities is set to begin a proceeding that could end up next spring with ratepayers subsidizing PSEG’s fleet of nuclear power plants to the tune of $200 million a year.

“I don’t think we can afford all of this. Choices have to be made,’’ Brand said, referring to the range of programs underway or pending before the BPU. In addition, the state is expected to solicit bids to build 1,100 megawatts of offshore-wind farms off the Jersey coast by the end of the year.

But Ralph Izzo, chairman, CEO and president of PSEG, the utility’s parent company, defended the investments, saying they aim to keep bills lower than they were 10 years ago.

Customers promised savings of $7.4 billion over 20 years

“For 115 years, we have been all about investing in New Jersey. We are not going to stop now,’’ Izzo said.

All told, the various clean-energy programs are projected to save customers $7.4 billion over the 20-year life of the program, according to Dave Daly, president and CEO of PSE&G. The bulk of those savings would come from energy efficiency where programs are expected to produce $5.7 billion.

Initially, customers’ bills would rise modestly. Beginning in 2020, the average impact would be less than 0.3 percent over a 2018 bill, and would peak at 4.7 percent in 2028.

Ralph Izzo, chairman, chief executive officer, and president of PSEG
“Helping our customers use energy more efficiently is the only way to simultaneously lower bills, clean the environment and create jobs,’’ Izzo said.

A comprehensive clean-energy bill signed by Gov. Phil Murphy this spring mandates utilities to reduce customers’ annual electric and gas use by 2 percent and 0.75 percent, respectively. Once customers start using less energy, their bills will come down even as rates rise.

Allowing it to recover lost revenue from customers

The planned $2.8 billion the company plans to invest in energy efficiency, however, hinges on the utility winning approval of a provision allowing it to recover lost revenue from customers who use less gas or electricity from energy-efficiency programs.

“You can’t expect a company to proceed without removing that disincentive,’’ Izzo said. The company is seeking approval of the so-called decoupling provision in a current rate case, but the utility would move forward with the investments if approved under the new filing.

How big a role utilities should play in promoting energy efficiency is a subject of
ongoing debate for many years.

“There has been no demonstration that utilities are a more cost-effective way to do energy efficiency or any other competitive functions,’’ said Steve Goldenberg, an energy lawyer representing large energy users.

But Paul Patterson, an energy analyst at Glenrock Associates in New York, disagreed. “They are a competent and successful utility,’’ he said. “It wouldn’t surprise me if they can do a better job than government.’’

The utility’s proposal would allow customers to use up-front rebates and other financial incentives to purchase more efficient appliances, smart thermostats and other equipment, as well as energy audits. The program also would target hard-to-reach customers, such as low-income, multi-family and small business.

40,000 charging stations

Credit: PSEG
Electric vehicle
Pamela Frank, CEO of EVCharge, a coalition promoting electric vehicles, welcomed the utility’s plan to accelerate the transition to plug-in vehicles. “It is exactly what the market needs,’’ she said of the plan to build 40,000 charging stations.

The utility also plans to spend $180 million to build 35 megawatts of energy-storage systems, which are deemed crucial to the widespread adoption of intermittent sources of renewable energy, such as solar and wind. The Murphy administration wants to develop 600 MW by 2021, the most aggressive goal in the nation.

Finally, PSE&G is proposing an ambitious program to install smart meters — two-way communication systems between the utility and customer — to improve reliability and restoration time during power outages.

Under its proposal, the company plans to install the meters with all its customers by 2024, if approved by the board. Brand, however, noted the BPU has a moratorium on installation of smart meters, pending a pilot program initiated by Rockland Electric.

“They are just way out in front of the BPU,’’ she said.

At a recent event sponsored by NJ Spotlight on energy efficiency, there was general endorsement of having utilities take the lead in promoting energy-efficiency efforts in the state, if performance standards and penalties were included.