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JCP&L files for rate hike, will add Sandy costs later

By: Ed Beeson |

Jersey Central Power & Light is seeking a small rate hike to help it pay for damages caused by last year’s freak storms.

For this year’s freak storm – Hurricane Sandy – a proposal for a more substantial increase is in the works.

New Jersey’s second-largest utility today asked the state for permission to raise rates by nearly $31.5 million a year. Under this plan, the average residential customer would see their monthly bill rise by 1.4 percent. That would mean $1.51 each month for the customer who uses 650 kilowatt hours of electricity, JCP&L said.

The request was made in a so-called base rate case that New Jersey’s Board of Public Utilities ordered JCP&L to make after a state watchdog raised questions about the utility’s earnings and infrastructure investments.

The money would be used to offset the costs of last year’s Tropical Storm Irene and freak October snowstorm, as well as upgrade infrastructure to improve the utility’s storm response and energy distribution systems, JCP&L said.

But JCP&L said it will amend the filing later to reflect the massive losses it suffered after Hurricane Sandy. Officials from FirstEnergy Corp., the Akron, Ohio-based parent company of JCP&L, told Wall Street analysts on Nov. 8 that Sandy caused more than $500 million worth of damage, the vast majority of which was in New Jersey. The company repaired flooded substations and replaced 7,000 poles, 24,000 crossarms, 3,000 transformers and nearly 600 miles of wire and cable, officials said.

A final tally of losses is expected by year end, said JCP&L spokesman Ron Morano.

“We know that it’s more than that,” Morano said of the $500 million figure. He added that it’s a “fair assumption” that the proposed rate request will go up once the total losses from the storm are calculated.

FirstEnergy, in a Securities and Exchange Commission filing, said it expects that 95 percent of the Sandy costs are expected to be capitalized or deferred for future recovery from customers. Morano said such future recoveries would be amortized, or collected over time.

The proposed rate increase already has rankled some who are upset with JCP&L over its performance during the storms of the last 15 months. The utility drew the ire of government officials and residents after Sandy for its projections of how quickly it said it was restoring power to darkened neighborhoods and towns. It faced even stiffer criticism after Irene and the October 2011 snowstorm, when it was the subject of a blistering state report on its preparations and response to the storms.

“As a mayor of my town, I want them out,” Robbinsville Mayor David Fried said today after the rate hikes were announced. “They clearly don’t have the infrastructure and they’re passing the costs onto their customers.”

Morano noted the filings were to harden infrastructure damaged by the storm.

Today’s filing does not make the proposed rates immediately effective.

Instead, it kicks into gear a months-long legal process to examine JCP&L’s finances and determine whether it requested rates are permissible. In general, it takes between nine months and a year before any rate changes take effect, said Paul Flanagan, litigation manager for the Division of Rate Counsel, the watchdog group that urged the rate case.

The rate case, among other things, outlines infrastructure spending that JCP&L has been making over the years. A key question that people will be examining is whether there were investments that JCP&L could have been making that would have prevented damage of recent storms, said Ev Liebman, associate state director for advocacy for the AARP, which supported the Rate Counsel’s push for a rate case.

“If there were and they didn’t do it, we don’t think ratepayers should be left holding the bag,” she said.

Last year, the Rate Counsel alleged that JCP&L may have earned as much as $90 million more than it should have. It also questioned why JCP&L had not filed a rate case since 2005. Utilities typically file rate cases when they need to raise rates. While JCP&L disputed the Rate Counsel’s calculations, the BPU in July ordered the rate case to be made.

JCP&L’s base rate case can be viewed here.