PSE&G frustrated by resistance to 'Energy Strong'

Posted: April 24, 2014

A few months after Hurricane Sandy devastated the Atlantic Coast, New Jersey's largest utility proposed in February 2013 a 10-year, $3.9 billion construction program to "harden" electricity and gas systems against future storms.

Ralph Izzo, chairman and CEO of the parent company of Public Service Electric & Gas Co., said he believed his company's "Energy Strong" proposal was a no-brainer in the wake of widespread outages caused by Sandy and 2011's Hurricane Irene.

"We figured, who can argue with that?" he said this week.

Now, Izzo, who heads Public Service Enterprise Group of Newark, is frustrated that a "unique opportunity" may be passing the state by.

"We're entering our second construction season post-Sandy without a clear road map," he said.

The utility's plan to spend $2.6 billion for the first five years of the program has run into stiff opposition before the Board of Public Utilities (BPU), New Jersey's regulatory agency.

The Division of Rate Counsel, which acts as New Jersey's ratepayer advocate, lined up experts who questioned the program's cost, portraying it as a boondoggle whose chief beneficiaries would be PSE&G shareholders.

Large industrial users are opposed. So is the Sierra Club, which dubbed the program "Energy Strong Arm."

"We're not in the business of issuing blank checks to anybody," Robert M. Hanna, then BPU president, said last year in declining to take immediate action.

In February, the board held formal hearings on the first phase of the plan, which calls for spending $1.7 billion for the electric system and $900 million for gas-system improvements. PSE&G has 2.2 million electric customers and 1.8 million gas customers.

Settlement discussions are ongoing, but Izzo said it's likely to come down to a board vote by June.

In the meantime, the adversaries are mobilizing political support. PSE&G has lined up an array of local officials, legislators, and unions who argue that the utility's plan would create jobs and make its systems more secure at a reasonable cost.

"We need to harden our infrastructure to ensure that our power stays on, but we have to make sure that we're not wasting any money while we're doing it," State Senate President Stephen Sweeney (D., Gloucester) said during a recent teleconference with members of AARP, which has opposed the utility's plan.

That plan includes protecting or relocating flood-prone substations, strengthening utility poles, and burying some overhead power lines.

Some natural-gas facilities would be lifted above sea level, to protect them from storm surges. PSE&G also proposes replacing about 750 miles of cast-iron mains and 40,000 steel service lines.

The utility's critics imply that PSE&G is using the post-Sandy opportunity to fund a building spree from which investors can collect a guaranteed return. They noted that PSE&G conducted a cost-benefit analysis only after it filed the proposal, and by those calculations, it would take decades to realize the full benefit of the investment in reduced outages.

"It is important to keep in mind that caring about the ratepayers means not only preventing outages but making sure their rates are reasonable," said Stefanie A. Brand, director of the Division of Rate Counsel.

PSE&G has asked regulators to approve a special charge to customer bills to pay for the costs, which would be spread out over decades.

The utility estimates that at its peak in 2019, "Energy Strong" would add 4.5 percent to the bill of a typical residential electric customer and 5.2 percent for a typical residential gas-heating customer.

It also portrays the program as having minimal impact on bills, because the new costs would be added at the same time that several customer charges are expiring. Coupled with low energy costs because of the abundance of natural gas, most customers won't feel the pinch, the utility says.

"It's not a bill increase," said Kathleen Fitzgerald, vice president of corporate communications for the parent company. "That's the magic of it."


amaykuth@phillynews.com

215-854-2947 @Maykuth

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