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Slightly Lower Power Prices for Most Utility Customers; PSE&G Rates Could Jump 5%

By: Tom Johnson |

Cheap natural gas helps hold down cost of electricity, but pricey transmission projects could mean higher bills for all customers.

Some residential and small-business customers could see a very modest drop in their electricity bills this June, but the more than 2 million customers of Public Service Electric & Gas — the state’s largest utility — could be hit with a 5 percent boost.

And there may be more bad news for those customers in the future.

A state-run auction to determine how much New Jersey’s four utilities pay for the power needed to keep the electricity flowing to most of their residential and small-business customers yielded slightly lower prices to be paid by some ratepayers. Utilities make no profit on the electricity they purchase from power plants, which makes up the bulk of the bill consumers pay, and merely pass on the costs to customers.

The results of the auction mark the seventh year in a row that many residents and small businesses will see lower or stable electricity prices, a result largely due to historically low prices for natural gas, which is used to generate much of power that is supplied to customers.

“The auction was pretty close to people’s expectations,’’ said Paul Patterson, an energy analyst with Glenrock Associates in New York.

Others had a different view. “It’s a mixed bag,’’ said Division of Rate Counsel Director Stefanie Brand, who noted the prices for PSE&G customers have gone up about 15 percent in three years. “What we’re seeing is the cost of these power lines,’’ she said.

The outcome also suggests that costs may soon rise for customers — a prospect even state officials acknowledged. For PSE&G, the increase in its rates was blamed on increased transmission costs factored into the cost of electricity delivered into the system. The Newark utility plans to spend $3.8 billion on new transmission projects from 2015 to 2017, according to Karen Johnson, a spokeswoman for PSE&G.

Traditionally, utilities earn a much higher rate of return on transmission projects approved by the federal government than state regulators. Many of PSE&G’s transmission projects have been mandated by concerns that there could be reliability problems with the power grid if they were not undertaken, according to Jerome May, director of the Division of Energy of the state Board of Public Utilities.

The good news is that the more than half million customers served by Atlantic City Electric will see rates decline by 2.97 percent. For Rockland Electric (about 66,000 customers), rates will dip by and 3.2 percent. Prices for Jersey Central Power & Light customers will essentially remain flat.

The BPU, which oversees a small portion of the cost of electricity service since the state broke up its electric and gas monopolies 16 years ago, conceded it has little authority over transmission costs. The Federal Energy Regulatory Commission determines those rates, which now account for about 20 percent of a customer’s bill, according to a consultant hired by the BPU.

“There are limited actions that the board and the state can take,’’ said BPU President Richard Mroz during a teleconference call with reporters and industry analysts. Mroz said the state believes part of the solution is to build more power-generating stations, a strategy that would reduce the need for more transmission lines.

Still, the board and other state agencies have taken more aggressive actions to convince FERC, and the regional operator of the nation’s largest power grid, to take steps to reduce the impact of changes to energy regulation on customers.

Some of those changes could boost bills for consumers. PJM Interconnection, the operator of the regional power grid, is proposing modifications that would require power suppliers to take steps to ensure the necessary capacity is there to keep electricity flowing. That problem emerged during the polar vortex last winter when frigid temperatures caused many generating units to run into trouble meeting their required loads.

While not yet adopted, the proposal could lead to those costs being passed on to customers — a measure already approved by the BPU last November, although when it would take effect is still unclear. The state is trying to make changes in the proposal to lessen its impact on consumers.

For larger energy users, such as manufacturers who have switched to alternative energy suppliers, the prices coming out of the auction remained essentially stable, according to the BPU.

Some of these expenses also reflect what some utilities will recover in storm restoration costs following extreme storms like Hurricane Sandy.