Transmission Upgrades Push Electricity Prices for Residential, Commercial Customers

Increases projected to be modest, after most recent power auction, but BPU does raise concerns about money utilities are pumping into transmission
Credit: anprocházka via Flickr
Transmission tower

New Jersey residential and small-commercial customers will likely see their monthly electric bills increase slightly this June, a mild reversal of the past few years when prices were relatively stable or dipped because of low natural gas prices.

Nevertheless, New Jersey Board of Public Utility officials described the 19th annual power auction conducted by the agency as an overall success, despite concerns that increasing investments in transmission upgrades are beginning to take a toll on customers.

“The cost of transmission has been out of hand and has been for a long time,’’ said BPU president Joseph Fiordaliso. “The rate of return is too high,’’ he added, referring to what utilities earn for making those investments.

In the end, three of the four electric utilities will see their residential and small-commercial customers’ bills increase, topped by the state’s biggest utility, Public Service Electric & Gas, whose typical residential customers will see bills climb about 4.4%, or $5.20 more per month. The increases take effect June 1.

Bills from Jersey Central Power & Light, the state’s second-largest electric utility with more than 1 million customers, will increase by 2.4% or by $2.09 a month; typical bills for Atlantic City Electric’s residential customers will rise by 0.3% or 40 cents monthly, while Rockland Electric customers will experience a drop of 1.6%, or $1.89 per month.

Costs for commercial customers

For larger commercial and industrial customers who buy electricity from independent suppliers, costs also will increase when compared to previous years, largely a result of increased demands to supply power from renewable sources and higher costs to provide capacity to keep the lights on.

The boost in bills was largely foreseen by a consultant hired by the BPU who projected rising energy prices could boost costs as well as higher transmission expenses, most evidently seen by PSE&G customers.

“We expected to see higher prices and that’s what we got,’’ said Frank Mossburg, managing director of Bates White, which had been hired by the board to oversee the auction. The higher charges also were caused by lower prices expiring under contracts purchased three years ago in a prior auction.

PSE&G pumps money into transmission

Transmission was a factor in all of the increases, but none more significant than PSE&G, which has been investing huge amounts of capital into transmission upgrades. In a five-year plan outlined last year, it sought to invest $5 billion in transmission upgrades.

But PSE&G argued that despite the increase, customers still spend less than they did more than a decade ago.

“Although electric residential bills will increase moderately on June 12 as a result of the auction, the typical residential customers who receive electric and gas from PSE&G are still paying about 30 percent less than they were in 2008,’’ said Michael Jennings, a spokesman for the utility.

Fiordaliso, however, vowed the board would take a serious look at transmission costs without explaining what course of action they may take, other than making filings before the Federal Energy Regulatory Commission, which oversees transmission issues and rates.

“FERC, in my many times, is not sympathetic to the woes of New Jersey,’’ he said.

But how effective those filing will be remains to be seen. “It is unclear what New Jersey plans to do because (rate of) returns have been generally developed by FERC,’’ said Paul Patterson, an energy analyst with Glenrock Associates in New York.

Jeff Tittel, director of the New Jersey Sierra Club, was more skeptical. “After they approved every power line that came before them, they now say they are going to rein them in,’’ he said.

The BPU did not mention this, but ratepayers since last April are also paying a subsidy to all utilities to cover a $300 million subsidy to keep the state’s three nuclear plants open. The facilities are operated by an unregulated subsidiary owned by Public Service Enterprise Group and Exelon Corp.

The state’s new Energy Master Plan, unveiled last month, calls for the BPU to exercise regulatory and increased oversight over transmission upgrades. In part, the plan proposes the state explore nonwire alternatives to expanding the system when upgrades benefit out-of-state consumers instead of New Jersey residents.

BPU Commissioner Upendra Chivukula said that could be achieved by the “grid-of the-future” by focusing on distributed energy generation — facilities that produce power locally — to reduce transmission costs.