Law360

PSE&G's $4B Grid Upgrade Plan Draws Opposition In NJ

Law360 —Tuesday, March 19, 2013

By Joshua Alston

New York — A collective of New Jersey lobbying groups on Monday sent the states Board of Public Utilities a letter urging the regulator to block a proposal by Public Service Electric & Gas Co. to spend $3.9 billion fortifying its power grid, amid concerns that ratepayers will ultimately suffer.

The letter, submitted jointly by The Chemistry Council of New Jersey, AARP's New Jersey Chapter, The New Jersey Large Energy Users Coalition, New Jersey Public Interest Research Group and New Jersey Citizen Action, asks the state's BPU to reject or indefinitely delay PSE&G's proposed Energy Strong program, a series of infrastructure investments PSE&G says is necessary to prevent future power failures like those that have plagued the state during major hurricanes.

The Energy Strong program was proposed following an order issued by the BPU in January directing New Jersey's electric providers to conduct six-month investigations into different methods of better preparing the electric grid for extreme weather, the letter said. The lobbying groups say PSE&G submitted its upgrade proposal without conducting the investigations, which would have required cost-benefit analyses for each improvement option, the letter said.

"We expect the board to satisfy its statutory obligation to protect the interests of New Jersey ratepayers, particularly where, as here, we are being asked to pay literally billions of dollars through a costly rate surcharge to support a utility proposal that does not comply with the board's order," the letter said.

Michael Jennings, a spokesman for PSE&G, told Law360 on Tuesday that the grid improvements are a necessary step to insulate New Jersey from the type of widespread power outages caused by major storms like Sandy.

"We believe New Jersey can't stand for business as usual given the hardships placed on us by recent storms, and we want to rebuild as soon as we can," Jennings said.

Jennings said the company plans on filing information shortly that will better explain how rates would change due to the improvements, and said rates will remain essentially flat because of a trio of bill surcharges that will be eliminated in January 2014, January 2016 and January 2017, respectively.

Given how PSE&G plans to stagger the improvements — $2.6 billion or two-thirds of the total project will be spread over the first five years — Jennings said the changes won't sting ratepayers as the lobbying groups have suggested.

"We don't really understand their math," Jennings said.

PSE&G announced Energy Strong last month, with improvements that include raising, relocating or protecting switching and substations that have been affected by recent storms and upgrading flood-threatened gas mains.

The 10-year program would also cover the deployment of smart grid technologies, more redundancy in the system to reduce outages and the placement of 20 miles of overhead electric distribution lines underground, according to the company.

The Newark, N.J.-based utility said more than 90 percent of its 2.2 million electric customers lost power during Hurricane Sandy because of damage to electrical facilities and equipment. With the proposed protections, about 800,000 of the customers affected by a storm like Sandy would remain with power and others would see quicker restoration times, according to PSE&G.

"The cost of inaction is too high," Ralph Izzo, chairman and CEO of PSE&G parent Public Service Enterprise Group Inc., said in a statement.

— Additional reporting by Martin Bricketto. Editing by Lindsay Naylor.

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