Gov. Protects Utility Consumers

Last week, Governor James E. McGreevey signed into law Senate Bill 869, which will allow – but not require - the Board of Public Utilities to authorize the securitization of portions of utilities’ deferred balance debt. The new law will minimize the burden imposed on ratepayers in August 2003 when rate caps are lifted and New Jersey’s electric utility companies begin to pay back almost $1 billion in deferred balances.

“Our goal is to protect the interests of New Jersey’s ratepayers,” said McGreevey. “Signing this bill is part of our commitment to controlling utility rates.”

Deferred balances are losses accumulated by utilities when the cost of purchasing electricity exceeds the capped rates they are allowed to charge customers. Under the Electric Discount and Energy Competition Act (EDECA), enacted in 1999, ratepayers are responsible for repaying reasonably incurred deferred balances, plus interest. Under S-869, the immediate rate impact of deferred balances can be reduced through securitization.

In signing the bill, Governor McGreevey fulfilled a recommendation of the Deferred Balances Task Force, which was established by Executive Order on July 31, 2002, and charged with examining why three out of four electric utility companies have incurred such a massive amount of deferred balances. On Friday, August 30, the Task Force submitted to Governor McGreevey a report that points to fundamental flaws in EDECA as the principal causes of the nearly $1 billion deferred balance problem.

In transmitting the report to the Governor, Task Force Chair Zulima Farber noted, “No other state in the nation has implemented a restructuring act with such provisions and, consequently, no other state has a deferred balance debt near as large as New Jersey’s.” The Task Force report recommended signing S-869 to provide another tool to help deal with the potentially $1 billion in debt that, by law, ratepayers must refund. The Task Force also noted “S-869 contains restrictions and safeguards that would limit the use of securitization to assure that it benefits ratepayers.”

McGreevey also said he will implement other recommendations by the Task Force designed to protect ratepayers. These include:

* Enacting strong consumer protections to ensure that the burden of proof is on utilities to show that their deferred balances are recoverable. These protections include full evidentiary hearings with participation by the Ratepayer Advocate and other interested parties.
* Requiring an independent audit of utilities’ deferred balances petitions.
* Employing aggressive mitigation tactics, such as energy efficiency programs, to slow the accumulation of deferred balances over the next year, before rate caps expire in August 2003.
* Mandating that a statement be mailed with consumers’ monthly utility bills that will educate them on deferred balances and their potential rate impact.

“The Task Force Report is a thoughtful and productive document that will ensure New Jersey ratepayers are protected and treated fairly as the full impact of EDECA begins to be felt three years after the law was enacted,” McGreevey said.

The Task Force also comments in its report that deferred balances are just one part of a deregulation effort that has failed to live up to expectations and recommends that the Governor examine whether broader changes in EDECA and the electricity market would facilitate retail competition more effectively and better protect the interests of consumers.

“Competition has not developed, consumers have little more choice than they had before EDECA, and wholesale energy prices have risen sharply,” the report states.

The Task Force consisted of eight members: former Public Advocate Zulima Farber; former PSE&G CEO Lawrence Codey; State Director of New Jersey AARP Jim Dieterle; energy expert Steven Gabel; State Treasurer John McCormac; former Assistant Deputy Public Advocate James McGuire; Deputy State Treasurer Robert Smartt, and; former BPU President and Commissioner of the Department of Environmental Protection and Energy Scott Weiner. In conducting its investigation, the Task Force solicited input by sending detailed questionnaires to relevant constituencies, including consumer groups, utilities, legislators, and energy and environmental experts.

The Deferred Balances Task Force’s report to the Governor and the questionnaire responses the group received are available online at www.state.nj.us/deferredbalances.

Article continues below

---

advertisement

---

Author: Paul Aronsohn