Hearing Monday on PSEG project that would raise rates 11% over five years

By: DAVE SHEINGOLD |

A proposal to raise gas rates more than 11 percent over five years to help pay for $1.6 billion worth of upgrades to the region’s power grid is scheduled for public review Monday in Hackensack.

At 3:30 and 6:30 p.m. in the Bergen County Administration Building, state regulators will take comments on a proposal by Public Service Electric and Gas Co. to raise residential natural gas rates 11.2 percent over five years to replace hundreds of miles of aging, leak-prone gas mains and tens of thousands of gas connections to homes and businesses in its northern and central New Jersey territory, including parts of Bergen and Passaic counties.

For PSE&G, the state’s largest utility, the project would be its second major improvement proposal in the past three years.

The increase would gradually raise the average residential bill by $8.60 a month from 2016 to 2021. Small businesses, such a pizza parlor or a laundry, would see increases of about 8.2 percent, or an average of $13.46 per month, although PSE&G said increases were likely to be offset by continuing drops in the price of natural gas, which makes up the majority of gas bills in New Jersey.

The project would mark the first phase of a 30-year plan, which includes possible additional rate increases beyond the first five years, to make gas distribution safer, more durable, and better able to serve modern residential and commercial needs.

The plan comes fresh on the heels of the state Board of Public Utilities’ approval in 2014 of PSE&G’s Energy Strong program, which uses annual rate increases to help fund $1.2 billion worth of upgrades, mostly to the company’s electric grid, over three years.

The projects are part of a broader effort by the state and utility companies to upgrade outdated components of New Jersey’s electric and gas systems, make them more resistant to weather damage, and avert power outages like those that followed Superstorm Sandy and other major storms from 2010 through 2012. PSE&G’s 1.8 million gas customers in northern and central New Jersey include about 486,000 in Bergen and Passaic counties.

While the company has a continuing program that has replaced about 40 percent of its cast-iron gas mains with plastic pipes, it is seeking this special rate increase to speed up the process for finishing the job and addressing concerns by regulators about gas leaks that put out dangerous methane gas.

The company also has noted that, despite the rate increases, overall gas bills are expected to continue the decline of recent years, mainly because of drops in the price of natural gas following discovery of underground supplies in Pennsylvania and elsewhere. The cost of the actual gas, which has dropped 47 perecent for PSE&G customers since 2009, represents the largest component of gas bills in New Jersey, not the expense of distribution.

“Because the gas supply savings have gone up and the bill has gone down so dramatically, now would be a good time to make these accelerated investments in our infrastructure,” said Karen Johnson, a PSE&G spokeswoman.

The price tag of the latest proposal surpasses the Energy Strong project, proposed in 2013, and PSE&G has proposed using the same unusual funding mechanism of annual pay-as-you-go contributions from ratepayers instead of the traditional procedure of seeking rate increases when work is complete. But while opponents of Energy Strong charged that the funding mechanism provided too little protection for ratepayers, the latest plan has produced little of the controversy that surrounded Energy Strong and led to the plan being trimmed from $2.6 million to $1.2 million.

Two unions that represent electrical and plumbing workers at PSE&G have endorsed the latest proposal, while traditional allies who fought Energy Strong have yet to stake an official position.

Those allies include a coalition of commercial energy users; AARP, which represents older residents; and the state Division of Rate Counsel, which advocates for consumers in utility matters. They have only raised questions about whether the upgrades should be done as a normal part of PSE&G’s business.

“I do think they have an obligation to do this within existing rates,” said Steven Goldenberg, who represents the New Jersey Large Energy Users Coalition. “The question is, is this truly necessary or is this simply an exercise in the company spending money to benefit their stockholders at the expense of ratepayers?”

Under PSE&G’s proposal, 810 of the company’s 3,800 miles of cast-iron gas mains – some dating back before 1940 – would be replaced with stronger plastic pipes that would reduce leaks and handle higher-pressure gas flow required by appliances such as tankless water heaters, gas-powered residential power generators and commercial cooking stoves. While 29 percent of PSE&G’s lines are made of cast iron, they account for 80 percent of its leaks, according to the company’s figures.

About 55,000 connections to homes and businesses also would be replaced, while 74,000 gas meters would be moved from the inside to the outside of buildings to make them easier to turn off during emergencies, and to reduce interior gas leaks.

The hearing in Hackensack is the last of three before a trial-like proceeding planned in the fall and the BPU’s ruling on the proposal.

Hearing Monday on PSEG project that would raise rates 11% over five years