Does PSE&G Owe Money To Ratepayers?

The Record ( — Tuesday, July 17, 2007


The state's public advocate is asking an administrative law judge to order Public Service Electric and Gas Co. to return $130 million he claims the utility over-collected from ratepayers.

The request comes less than a week after an Oradell man filed a civil suit and a petition with the state Board of Public Utilities, claiming PSE&G overcharged customers millions of dollars over the last eight years.

All three actions involve financing from the sale of PSE&G's power plants to an unregulated sister division, PSEG Power, as part of the state's deregulation of its electric industry in 1999.

PSE&G and PSEG Power are units of Newark-based Public Service Enterprise Group.

In papers filed Monday with the Office of Administrative Law, Public Advocate Ronald Chen claims that PSE&G overcharged customers by miscalculating interest on a $540 million loan it received from PSEG Power at the time of deregulation.

The loan was fully repaid, but the charges remained, Chen said.

In 2003, PSE&G returned $205 million it overcharged customers, but the utility still owes ratepayers $130 million in back interest, he said.

"With electric rates going up every year, every penny counts," Chen said. "Yet PSE&G is refusing to return $130 million they owe to ratepayers. This is totally unacceptable, and we are doing everything we can to get this money back into ratepayers' pocketbooks where it belongs."

Public Service disagrees, claiming that the payments are part of a complex agreement worked out by numerous parties, including the ratepayer advocate, now part of the Public Advocate's Office.

"Retroactively, they're looking to take just one aspect of the deregulation agreement and saying it should have been written in a different way," said spokesman Paul Rosengren. "His argument is not with our interest, but with the way the agreement was struck."

The public advocate had asked the BPU to rule on the matter, but the agency transmitted the case to the administrative law division.

Customers are due refunds of about $17 each, Chen says.

In the separate suit filed in Superior Court in Hackensack, attorneys for Richard Murphy claim that payments to PSE&G for costs involved in the sale of the plants violate the state's constitution by providing special government protection to shield the utility from the effects of competition.

The suit was originally filed in April, but was amended last week.

The suit seeks to invalidate a monthly surcharge that goes to reimburse the utility for $2.9 billion it invested to build 16 power plants prior to the state's deregulation of the industry – so called stranded costs. The surcharge adds about $5.50 to the typical PSE&G residential customer's monthly bill.

The same issue is at the heart of the petition Murphy filed last week, asking the BPU to stop what he claims is a "double-recovery windfall" for the utility.

Murphy's attorneys – Michael Breslin of Hackensack and Daniel Sponseller of Sewickley, Pa. – and the utility agree on the basic facts.

The dispute is over what should happen with those windfall profits and the payments PSE&G receives for losses that never materialized.

In Public Service's view, the issues have already been decided by the courts, including a 2000 decision in which the Appellate Division of the Superior Court determined that the BPU's valuation of generation plants reflected the full market value at the time.

The court also concluded that all parties had had ample opportunity to be heard on all aspects of the decision.

That doesn't matter, Sponseller said. "None of the constitutional issues that we raised were before the court or decided.

"The constitution of New Jersey limits what the Legislature can do and prevents the granting of exclusive franchises."

The value of the plants now is not the issue, Rosengren said.

"The [value] of power plants went up beyond what anyone anticipated," Rosengren said. "At the time of the settlement, the plants were not worth much. If the value went down, would the same people demand we get less money from ratepayers?"

Public Service is the only one of the state's four major electric utilities affected by these issues because the other three sold off their power plants.

Copyright 2007 North Jersey Media Group Inc.

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