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State Cutting Back Clean Energy Spending

Critics applaud OCE straw proposal, which would reduce subsidies charged to business and industry

By: Tom Johnson |

The state is scaling back dramatically what it proposes to spend on clean energy programs in 2014, suggesting expenditures of $227 million, a far cry from the $379 million budget proposed in 2012.

In a straw proposal released late last week by the Office of Clean Energy, an arm of the state Board of Public Utilities, the proposed funding is not much more than what the agency proposed to spend for the first six months of 2013 — $194 million.

The proposal comes at a time of much uncertainty and increasing debate about New Jersey’s clean energy programs, which almost entirely rely on gas and electric customers’ subsidies to fund renewable energy and energy efficiency projects.

To clean energy advocates, those subsidies have helped propel New Jersey into a leadership position in clean energy, ranking third behind only California and Arizona in the number of solar installations. The straw proposal says New Jersey’s clean energy program has created nearly 13,000 jobs over the past five years. The program has not been cheap, however, costing ratepayers $2.6 billion over its life.

To critics, however, including many in the business sector, the subsidies have helped jack up the cost of electricity in a state with some of the highest energy bills in the nation. The agency says its new expenditures will keep gas and electric rates relatively flat.

Under the state’s straw proposal, a midsized commercial or industrial customer will pay $5,130 in additional surcharges annually on its electric bill to finance the program; a larger industrial customer will see its yearly power bill jump $36,32.

Typical residential customers will shell out about $27 more a year on their electric bills, and another $21 on their gas bills.

The issue has been particularly heated in recent years because both the Legislature and the Christie administration have repeatedly dipped into clean energy funds to help balance the state budget. In the upcoming budget proposed earlier this year by Gov. Chris Christie, another $152 million will be diverted from the fund, bringing the total appropriated from the account to more than $800 million under this administration.

The diversion, if it happens, will bring the clean energy budget up to $379 million, according to the straw proposal, even though much of the money will not be used for such projects.

The BPU, too, has come under criticism for its oversight of the fund, frequently raising more money from ratepayers than it can spend in any given year, leaving a huge pot of money just waiting to be diverted by lawmakers and administrators seeking to balance the budget without any tax increases.

In its straw proposal, the staff of the Office of Clean Energy recognized the problem, saying it plans to work with the Treasury Department to develop “appropriate procedures to better match the collection of funds from ratepayers to actual program’’ costs.

The bulk of the money — $177 million — raised from ratepayers in 2014 would be used to pay for energy efficiency programs, which help businesses and residents cut their bills by using less electricity or natural gas. The OCE said in its proposal that energy efficiency is the most effective way to lower energy costs in the state, a top priority of the relatively new Energy Master Plan adopted by the administration.

The amount 2014 total is less than the $193 million the agency allocated the previous year, but reflects a trend of reduced spending on energy efficiency projects by the state’s utilities. In 2011, the utilities spent $67 million on energy efficiency projects, way down from $124 million spent the previous year.

While virtually every electric and gas customer pays for the clean energy programs, many do not benefit from them, particularly lower-income residents who either lack the finances to participate or are unaware of how they can cut energy costs.

The straw proposal acknowledged that issue, which arises with both renewable energy projects, such as installing solar on homes, and energy efficiency projects.

“For non-participatory customers, the rates go up to support the . . . funding, but they do not enjoy the direct benefits associated with less usage,’’ the proposal said, referring directly to energy efficiency projects. The office hopes to examine how to broaden the program in the future.

Nevertheless, the lower spending levels for energy efficiency call into question whether New Jersey can achieve aggressive goals to reduce energy consumption in the state, another priority of the Energy Master Plan, as well as a means of reducing greenhouse gas emissions that contribute to global warming.

In contrast to energy efficiency, the state’s efforts to promote renewable energy will be allocated a mere $7.5 million in 2014, according to the straw proposal.

“Due to the past success of the solar program, staff does not believe NJCEP funding for solar incentives is required for the next four years,’’ the proposal said.