Law360

NJ Utility Watchdog Calls PSE&G Grid Upgrade 'Vague'

Law360 —Tuesday, March 19, 2013

By Joshua Alston

New Jersey's Board of Public Utilities on Wednesday pressed Public Service Electric & Gas Co. for more details on its $3.9 billion proposal to strengthen its electric grid against extreme weather, calling the proposal vague on cost-to-benefit analysis.

At its monthly meeting, the BPU discussed PSE&G's Energy Strong program, saying the utility would not get approval for its proposed hardening of the electric grid until it could provide detailed estimates of the costs, benefits and rate impacts for further review.

The board passed an order requiring PSE&G to provide the information in a timely manner, and is considering hiring an independent expert to evaluate the information.

"The proposal that the board has received is more of a conceptual framework than a detailed plan," said BPU President Robert M. Hanna, adding that preparing New Jersey's utilities for future storms was a necessity, but had to be balanced against other concerns. "We need to have details about what the reliability and safety benefits are as well as the cost to do the job. We're not in the business of issuing blank checks to anybody."

Hanna also addressed PSE&G's claim that Energy Strong will not create a cost increase for ratepayers, due to a trio of bill surcharges that will be eliminated in January 2014, January 2016 and January 2017, respectively, saying those surcharge roll-offs alone aren't enough to justify the project.

"Current rates do not set some kind of a mark that we are going to mindlessly hit," Hanna said. "We are not going to replace those deregulation and restructuring costs with something else just to keep the bills steady. It is not sufficient to say, 'The bill will remain at the same level.'"

Hanna said the BPU would factor the eliminated surcharges into its overall consideration of Energy Strong's merits, but those would be among many factors considered. If the project isn't approved, he said, ratepayers would see bill decreases.

PSE&G on Wednesday filed information with the board to explain how customer rates would be affected by the project, saying that a residential electric and gas customer could expect to pay $12 less in 2018 than today if Energy Strong is fully approved.

Business customers would also save, according to the utility, which attributes the steady or reduced bills to the dropping cost of natural gas, as well as the surcharge eliminations. PSE&G hopes to start its Energy Strong projects in July, pending the board's approval.

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.

A collective of New Jersey lobbying groups on Monday sent the BPU a letter urging it to block Energy Strong, raising concerns that ratepayers will ultimately have to bear the costs.

The letter — submitted 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 — asked the board to reject or indefinitely delay Energy Strong, saying PSE&G did not complete a board-directed investigation into how best to prepare the electric grid for extreme weather prior to submitting its proposal.

— Editing by Andrew Park.

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