NJ Spotlight

BPU Weighing Whether To Waive Societal Benefits Charge

Power producers argue that dropping various surcharges could give them a competitive edge over out-of-state suppliers — and the same advantage as PSEG

NJ Spotlight — Wednesday, November 3, 2010

By Tom Johnson

Some of New Jersey's biggest power producers are lobbying for a break on their gas bills, a step they say could make them more competitive with out-of-state suppliers, but could end up boosting bills for consumers and businesses.

In a proceeding sure to be hotly contested, the state Board of Public Utilities (BPU) is weighing whether to exclude certain power suppliers — those that employ natural gas to produce electricity — from having to pay various surcharges used to pay for other programs.

Dodging Surcharges

The stakeholder meetings, which begin November 15, stem from a rate case involving Public Service Electric & Gas, earlier this year. During the proceeding NJ Spotlight disclosed that PSEG Power, an affiliate of the Newark utility, has never paid assorted surcharges borne by other customers, including the societal benefits charge (SBC).

That surcharge is used to fund different state programs, including the clean energy fund, a low-income energy assistance program and the remediation of old coal gas manufacturing sites, among others. Imposed a decade ago when the state broke up the energy monopolies, the SBC has raised nearly $5 billion from gas and electric customers.

But PSEG never has paid the surcharge, nor two other assessments on utility bills, which are designed to curb greenhouse gas emissions and to promote economic growth in New Jersey. Now, some of the company's competitors are looking to gain the same advantage.

Double Taxation

Advocates of repealing the surcharges for suppliers that use natural gas to produce electricity argue the SBC is a form of double taxation, taxing the gas when it is used to produce electricity and then again, when the electricity is used.

In addition, they contend it puts New Jersey at a competitive disadvantage to power plants to the west, which do not have to pay those surcharges and typically produce cheaper, but dirtier power than the generating stations in the state.

"It causes environmental harm by benefitting production of power by states west of use, which tend to be dirtier," said Steve Gabel, president of Gabel Associates in Highland Park, which represents the Independent Energy Producers Association of New Jersey.

"It also goes to the competitiveness of New Jersey in a very large regional market," said Gabel. He noted imposing the surcharge on generators increases the cost of electricity in a state that business interests have long complained about high energy bills.

Consumer Advocates Unswayed

Those arguments fail to sway consumer advocates, who say the SBC was enacted as a way of funding programs deemed beneficial to all of society. "There's no reason they should be treated any differently than small businesses or residents," said Ev Liebman, program director for New Jersey Citizen Action.

David Pringle, campaign director for the New Jersey Environmental Federation, agreed. "The whole point of the SBC is that costs attributable to gas and electric production don't reflect the true costs of using these resources," he said.

Pringle also disputed the double-billing argument, saying the power supplier might pay the SBC at the point of production, but it is consumers or businesses who pay it when they use the electricity. He also questioned the competitiveness angle, saying the SBC is far from the biggest factor that determines which plants get put into service by the PJM Interconnection, the operator of the regional power grid.

The state agency plans two public hearings on the issue, but does not expect the presiding commissioner to submit a report to the other four commissioners until March.

Meanwhile, in a separate proceeding on PSEG Power's not paying the surcharge, the proceeding has been delayed because a settlement is expected shortly, according to those familiar with the case. By one account, PSEG Power avoided up to $300 million in surcharges by not having to pay into the fund.

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