Big Cut in PSE&G Spending Plan for Gas and Power Grids Ready to Be Finalized

Tom Johnson | July 31, 2019 | Energy & Environment
Utility tentatively agrees to significant reduction in proposed $2.5 billion program; public outcry over nuclear subsidy may have had effect

Credit: NJTV News
Gas pipeline
Public Service Electric & Gas has tentatively agreed to a sharply scaled-down plan to make its gas and power grids more resilient, accepting a $842 million, four-year program instead of a $2.5 billion, five-year spending program.

In a separate proposed agreement with stakeholders, the state’s largest utility also agreed to put off a decision on its $2.8 billion energy-efficiency filing until early 2020, one of the company’s biggest priorities. Instead, PSE&G will spend $42 million on existing programs aimed at cutting energy use by hospitals and multi-family housing, and installing smart thermostats.

Both agreements need to be finalized among stakeholders — the utility itself, staff of the Board of Public Utilities, and the New Jersey Division of Rate Counsel. The proposed settlements could be up for approval by the BPU at its initial September meeting.

The accords reached with regulators signal worries among regulators about spikes in customers’ bills resulting from the Murphy administration’s clean-energy goals, and its efforts to decrease power outages may be starting to resonate even though those policies already enjoy wide backing from the public and government officials.

The tentative agreements come in the wake of the administration approving a controversial $300 million subsidy to keep open three power plants operated by PSEG Power, an affiliate of the utility, this past April. Last month, the BPU also approved ratepayer subsidies to build 1,100 megawatts of offshore-wind capacity off Atlantic City, a project expected to cost $1.68 billion.

Ratepayers can’t shell out for every project

“Ratepayers simply don’t have the ability to pay for every project that PSE&G is proposing,’’ said Steven Goldenberg, an energy lawyer who was an intervenor in the PSE&G cases.

Significantly, under the tentative agreement on PSE&G’s Energy Strong II accord, the utility’s proposal to invest $863 million in 14 new pipelines to back up suppliers in the event of disruptions in interstate pipelines was eliminated. The utility had sought to invest $1 billion in its gas system but ended up only getting $150 million under the tentative settlement.

Stefanie Brand, director of the Office of Rate Counsel
“We were able to exclude projects without any real benefits to ratepayers,’’ said Stefanie Brand, director of the Division of Rate Counsel, who had criticized gas pipeline extensions as neither a wise investment for ratepayers nor the state.

Ralph Izzo, chairman, CEO and president of PSEG, the utility’s parent company, described the issue as a policy disagreement between the company and staff from the BPU. “They did not have an appetite to pay for something they view as insurance,’’ he said at the company’s earnings call with analysts yesterday. “We disagree.’’

Others had a different perspective. “This is a clear and unequivocal victory by the Rate Counsel,’’ said Doug O’Malley, director of Environment New Jersey. “They were looking to expand their pipelines with little justification. The tide is turning on unending fossil fuel infrastructure,’’ he said.

A broad coalition of most of the state’s environmental groups is pressing the Murphy administration to impose an immediate moratorium on all fossil fuel projects in New Jersey, where up to nine major pipeline projects have been proposed and a handful of new natural-gas-fired power plants.

A prudent approach?

Although there is much opposition to new natural gas projects, some environmental groups endorsed the utility’s plans to spend $2.8 billion on a wide array of programs to reduce energy use. The program was spurred by a new Clean Energy Act that requires utilities to curb customer electric use by 2 percent a year and gas consumption by 0.75 percent.

Under the proposed settlement, that program has been shelved temporarily until completion of the state’s Energy Master Plan — expected by the end of the calendar year — and new BPU regulations governing how utilities achieve those energy-efficiency targets.

Izzo has repeatedly argued the state should establish energy efficiency as its top priority, but the utility’s filing includes a provision to decouple revenue from gas and electric sales, a provision available in other states, but so far resisted by regulators in New Jersey.

“PSE&G is being very prudent,’’ said Jeff Tittel, director of the New Jersey Sierra Club. “The public outcry over the nuclear subsidy has gotten them to be more prudent about the projects they are pushing.’’