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State Agency Asserts PSE&G Grid Upgrade Will Boost Energy Rates 8 Percent

By: Tom Johnson |

If the state approves a $3.9 billion plan to modernize its power and gas grid submitted by Public Service Electric & Gas, it would boost rates for customers by 8 percent, according to the New Jersey Board of Public Utilities.

The assertion, made by BPU President Bob Hanna during a hearing before the Assembly Budget Committee yesterday, contradicts claims by the state’s largest utility that the sizable investment could be made while keeping rates mostly flat for gas and electric customers.

The so-called Energy Strong program proposed by PSE&G to “harden’’ its utility infrastructure in the wake of Hurricane Sandy is proving to be a difficult balancing act for the Christie administration, which wants to upgrade the power grid to prevent widespread outages without boosting energy costs in a state with some of the highest electricity prices in the nation.

The plan, submitted by PSE&G earlier this year, was shelved by the regulatory agency, which said it needed many more details before considering the proposal. Customers also face rate increases from the state’s three other electric utilities, which are planning to make their delivery systems more resilient and expecting to cover costs incurred responding to Sandy and other recent storms.

PSE&G insists, despite the BPU president’s comments, that its modernization program would not spike rates, primarily because of historically low natural gas prices and the elimination of customer surcharges stemming from the deregulation of the electric industry in New Jersey in 1999.

“Our most recent analysis shows that the average revenue increase per rate class solely to Energy Strong program, if adopted as exactly filed, would be less than a 6 percent increase from the 2/1/13 bills,’’ according to Kathleen Fitzgerald, a vice president of PSEG, the parent of the utility.

“That’s what makes the timing right for these forward-looking investments, in addition to creating 5,800 jobs,’’ she said. The utility also issued a press release yesterday.

In his remarks to the committee, Hanna credited PSE&G with stepping forward to undertake needed improvements to the power grid, which include big investments in making substations and switching stations less vulnerable to flooding, events that left tens of thousands of customers without power during Sandy.

Still, he told the committee that the utility’s proposals would raise rates for customers by about 8 percent, while acknowledging that there’s a need to invest in infrastructure improvements, such as raising substations.

Critics of the PSE&G proposal welcomed the BPU president’s comments, saying they project the investment petition would increase costs to consumers between 8 percent and 9 percent on their utility bills.

“Were it not for the Energy Strong program, consumers would be looking at an 8 to 9 percent decrease in their bills, which would be really welcome,’’ said Ev Liebman, associate director at the New Jersey chapter of AARP.

In the budget hearing, legislators repeated past criticisms of the state’s recurring raiding of clean energy funds, a process, however, that has been endorsed by the Democratic Legislature.

Assemblyman John Burzichelli (D-Gloucester) noted that more than $849 million has been diverted from a clean energy fund supported by surcharges on utility customers’ bills.

“Spend faster or collect less,’’ he told Hanna during the hearing, suggesting it is not an appropriate place to raise taxes from residents. “You’ve got more money than you need. You should get these electric rates reduced.’’

The criticism that the agency raises more money than it spends on clean energy programs is not a new one. Nor is it inaccurate: The BPU often leaves huge pots of unused dollars to be grabbed by lawmakers and administrations to plug holes in the state budget. This year, Christie proposes shifting $162 million out of the clean energy fund to help balance the state budget.

Hanna noted, however, that the surcharge also raises money to help low-income residents pay their energy bills, an issue lawmakers do not want to reduce, for the most part.

In a press release yesterday, PSE&G said 33 towns and Hudson County have endorsed its proposal to upgrade the grid.