PSEG sues insurance companies over Sandy damage

Utility crews work on power lines in Ship Bottom. "We had massive damage to our infrastructure," said a spokesman for Jersey Central Power & Light Co. (Patrick Semansky / Associated Press)
Utility crews work on power lines in Ship Bottom. "We had massive damage to our infrastructure," said a spokesman for Jersey Central Power & Light Co. (Patrick Semansky / Associated Press)
Posted: July 06, 2013

In a lawsuit with big implications for state utility customers, Public Service Enterprise Group and three of its subsidiaries accused 10 insurance companies of shortchanging them $456 million for damage to their power grid.

Insurers say they will cover only $50 million in payouts, arguing that policies restrict reimbursements above that amount in specific flood zones.

PSEG and its subsidiaries filed a lawsuit June 18.

Utility customers could end up paying the bill to repair the infrastructure if the court upholds the insurance companies' view.

Public Service Electric & Gas, the state's largest gas and electric utility and a subsidiary of PSEG, suffered huge harm to its power grid because of Hurricane Sandy.

Jersey Central Power & Light, the state's second-biggest utility, incurred more than $600 million in costs getting service restored after the storm, according to Ron Morano, a spokesman for the utility.

It initially sought to recover those costs in a rate case pending before the New Jersey Board of Public Utilities, but so far that effort has been blocked.

How the utilities will recoup costs from the storm damage will be determined in part by litigation, as well as a new proceeding initiated by the BPU in February but yet to start.

Earlier this year, PSE&G filed a $3.9 billion petition with the BPU, laying out an expansive program to to make the grid more resilient if extreme weather hits New Jersey again.

Among other things, the petition proposes to make utility substations and switching sites less likely to lose power during big storms by elevating them, installing floodwalls, and building berms.

Neither PSEG nor the insurers would comment on the court case.

Paul Patterson, an energy analyst at Glenrock Associates in New York City, said it was not unusual for disputes to emerge over big insurance claims. He said PSEG was trying to get just compensation for the premiums it has paid on its policies.

Jeff Tittel, director of the New Jersey chapter of the Sierra Club, said the case could have important consequences for consumers. "What they won't get from insurers, they will end up getting from ratepayers," he said.

Even before Hurricane Sandy struck, utility customers faced expensive upgrades to the power grid.

According to a report released this year, the state must spend $8.7 billion to make the grid reliable in extreme weather, an assessment produced before Hurricane Sandy struck and left as many as seven million people without power.

The investments come as state officials are wrestling with how to reduce energy costs traditionally among the nation's highest.


For more energy and environment stories by Tom Johnson go to www.njspotlight.com

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