New Jersey to Expect Rate Increases

The year 2014 will prove to be quite costly to gas and electric customers of New Jersey.

Beginning on January 13, the state Board of Public Utilities kicks off a proceeding to determine how much of the $640 million Jersey Central Power & Light (JCP&L) will be able to recover in costs it incurred from the extreme storms that battered New Jersey in the past few years.

The case is separate from another proposal by the state's second-largest electric utility seeking approval to raise its rates by $31.5 million — a 1.4 percent boost to the average customer's bill. JCP&L serves 1 million customers in central and northern New Jersey.

The JCP&L proceeding is the first of several cases to come before the regulatory agency in which the state's utilities aim to recover more than $1 billion in expenses racked up restoring power and service to their gas and electric customers after Hurricane Sandy and other storms.

At the same time, the utilities are being pressed by the Christie administration, office of the New Jersey Governor, to invest in their infrastructure to prevent the widespread power outages that businesses and homeowners suffered during those storms. These costs could exceed $4 billion over the next decade, according to filings by the utilities.

The biggest case before the agency involves the state's largest gas and electric utility, Public Service Electric & Gas (PSEG). It initially filed a proposal 11 months ago seeking to invest $3.9 billion over the next 10 years, but the case before the board now involves a plan to spend $2.6 billion over the next five years to harden its grid.

The Newark utility's case already has been the subject of public hearings last year, although settlement discussions have begun between adversaries in the matter in an effort to avoid a more drawn out proceeding before a BPU commissioner. Typically, utilities like to settle cases to avoid the legal expenses and delays involved in such quasi-judicial proceedings.

The proposal has generated widely divergent views, with the state Division of Rate Counsel, AARP, and a coalition of large energy users opposing the filing, which is strongly supported by labor groups and scores of municipalities.

With electric customers already stuck with some of the highest energy bills in the nation, the decisions pose a difficult balancing act for the BPU. How much do the utilities need to invest in hardening their systems to make them more resilient to more frequent severe storms, a prospect BPU President Bob Hanna has often said is likely to be the new normal.

Recognizing that dilemma, the agency earlier this year established two separate generic proceedings: one to determine what the utilities should recover from expenses incurred during recent bad weather, and another to establish steps the utilities should take to prevent the kind of extensive and prolonged outages that occurred during Hurricane Sandy.

To some, the timing is right to invest in necessary upgrades to gas and electric systems, primarily because customers have benefitted from a steep drop in natural gas prices because of relatively new deposits of the fuel found in Pennsylvania, New York, and other states.