BPU Puts PSE&G’s $4B Modernization Plan On Hold

The state wants Public Service Electric & Gas to spend ratepayer money to modernize its electric and gas systems, but is not ready to write a blank check allowing the utility to spend $4 billion over the next decade to cover those costs.

During its monthly meeting in Trenton yesterday, the state Board of Public Utilities said it wants a lot more information about the spending program filed last month by the state’s largest utility before acting on the proposal.

Instead, the BPU approved a couple of separate proceedings to examine how utilities will recover costs from Hurricane Sandy and other storms, as well as what is needed to enact other expensive measures to prevent outages caused by extreme weather in the future.

Opponents of the PSE&G proposal, who earlier this week had asked the agency to reject the spending plan out of hand or delay a decision indefinitely, applauded the BPU’s actions.

“We’re very pleased to see the board stand up for ratepayers today,’’ said Ev Liebman, associate director for advocacy for AARP. “They are not going to allow PSE&G to spend billions without details.’’

The PSE&G filing has emerged as a contentious issueas the state tries to decide what needs to be done to better prepare for devastating storms like Hurricane Sandy, which left 7 million people without power.

The utility proposes many steps, which virtually everyone agrees are needed, to make the power grid more resilient -- such as moving, building flood walls around or elevating substations and switching stations, which flooded after Sandy, leaving tens of thousands without power.

In deciding that the so-called Energy Strong proposal submitted by PSE&G failed to provide enough information, BPU President Bob Hanna said it doesn’t distinguish between long-term mitigation measures and reliability steps already taken by the utility as part of routine maintenance.

“It’s more of a conceptual framework than a detailed plan,’’ Hanna said, while acknowledging the need to harden substations to protect them from flooding, to selectively move some utility lines underground, and to establish better outage- management systems — all of them features of the PSE&G filing.

“There’s many things the board needs to look at’’ to meet its mandate of providing safe and reliable utility service, Hanna said. But he added that the BPU also needs to consider costs and affordability.

“We’re not…issuing blank checks to anybody,’’ he said.

Perhaps more important, Hanna addressed the claim repeatedly raised by PSE&G that even with the proposed expenditures, ratepayers’ bills will essentially stay flat.

The utility contends that’s possible as a result of lower natural gas prices (which drive down electricity and gas bills) and the fact that certain surcharges stemming from deregulation of the energy sector will disappear from customers’ bills in the next couple of years.

The deregulation surcharges are particularly contentious issue for critics of PSE&G, who argue that many of the costs imposed on ratepayers should never have been put in place to begin with because they were based on a false premise: that the company’s power plants would be less competitive in a deregulated market. Few new power plants, however, came to be built, making the company’s facilities much more profitable.

“We’re not going to replace those costs with something else just to keep the bills the same,’’ Hanna said. Those surcharges will have cost ratepayers $2.9 billion by the time they are erased from customers’ bills.

New Jersey Division of Rate Counsel Stefanie Brand, whose office has disputed the utility’s assertions that bills would remain flat even with the projected $3.9 billion investment, praised the board’s decision.

“I see the BPU as acting as the adults in the room,’’ Brand said. “We may need to spend some money. We agree we have to do more, but we don’t want to spend more than we have to, and we don’t want to spend on something that does not help.’’

Ralph LaRossa, PSE&G’s president and chief operating officer, said in a conference call with reporters that he had no major disagreements with the board.

“We don’t think we should fill up the bill for the purpose of filling up the bill,’’ he said. “What we really want is to provide reliable service.’’

In a new filing by the utility, it sought to demonstrate how bills will remain flat, and, in some cases, would even decline if its plans are approved. By 2018, the utility contended, the typical residential bill would drop by $12 annually and the bill for a large utility customer could fall by as much as $1 million a year.

Those projections, however, are disputed by analysts in the Division of Rate Counsel, who claim bills would increase for both residential and industrial customers.

“An energy infrastructure that is better able to withstand storms like Sandy and other natural disasters can help save millions of dollars in lost revenue and protect our families from the impact of extended outages,’’ said Ralph Izzo, president and chief executive officer of Public Service Enterprise Group, the parent of PSE&G, in a statement issued by the company.

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