NJUA Testifies at BPU Energy Master Plan Hearing

On Wednesday, August 13, NJUA President and CEO Andrew Hendry testified before the Board of Public Utilities at a public hearing held at the State House in Trenton regarding updates to the 2011 Energy Master Plan. NJUA also submitted the following written testimony which includes matters presented by Mr. Hendry at the hearing.

Re: Comments on Energy Master Plan

I write on behalf of the energy utility members of the New Jersey Utilities Association (NJUA), specifically, Atlantic City Electric Company, Jersey Central Power & Light Company, New Jersey Natural Gas Company, Pivotal Utility Holdings, Inc. d/b/a Elizabethtown Gas, Public Service Electric and Gas Company, Rockland Electric Company, and South Jersey Gas Company in response to the request for comments on the NJ Energy Master Plan (EMP). NJUA represents 16 investor-owned utilities that provide electric, natural gas, telecommunications, water and waste water services to residential and business customers throughout the State. We appreciate the opportunity to offer comments on the EMP.  These comments reflect the consensus views of the above-referenced energy company members.   

As the New Jersey Board of Public Utilities (BPU) conducts its hearings and receives comments with respect to the EMP, we ask that you consider the following:

Energy Distribution System Infrastructure Resiliency

In 2011, the Administration stated that the EMP is the “Administration’s strategic vision for the use, management, and development of energy in New Jersey over the next decade” which includes emphasis on “improving grid reliability” and recommendations that focus on “initiatives and mechanisms which set forth energy policy to drive the State’s economy forward.”[1]  Since the adoption of the 2011 EMP, New Jersey has experienced a number of large storms.  Ranging from hurricanes, ice and heavy snow, a derecho, and extremely severe thunderstorms, each weather event has affected New Jersey’s energy infrastructure in a different manner.  Additionally, each storm has brought with it an increased focus by policymakers on investor-owned utility response to customer outages and the infrastructure’s ability to withstand destructive weather conditions.  As such, NJUA respectfully recommends that the updated EMP include, as a central element of the Administration’s strategic vision, support for implementation of programs and regulatory cost recovery mechanisms that enable New Jersey energy companies to effectively and efficiently increase resiliency. 

It is estimated that the average annual cost of power outages nationwide caused by severe weather events is between $18 billion and $33 billion per year.[2]  It follows that in a year with significant storms, the costs would be much higher.[3]  The economic effects of Hurricane Irene and Superstorm Sandy in particular have prompted NJUA energy companies to look more comprehensively and strategically at storm hardening and resilience of transmission and distribution systems.[4]  In addition, a number of the companies have sought BPU approval to implement programs through which they have, in the aggregate, invested billions of dollars to protect and strengthen electric and gas systems.  These programs have created thousands of jobs and have enabled construction of improvements designed to mitigate economic losses that will occur in relation to future storms.  NJUA believes the EMP should direct that when the BPU evaluates the cost of proposed investment in utility infrastructure, the economic cost of not making that investment should also be considered.[5]  The true costs of service interruptions may take a number of forms, including “lost wages, spoiled inventory, [and] delayed production …”[6]  Investment in energy utility resilience should be seen as likely to mitigate utility programmatic costs over time, resulting in significant savings to the State’s economy and reducing the hardship and inconvenience customers experience as a result of outages. 

NJUA suggests that the EMP encourage the BPU to continue to consider, where appropriate and with utility input, implementation of innovative cost recovery mechanisms for infrastructure investment that allows the utility timely recovery of investments as they are made.  For example, the BPU may consider implementing rate adjustment mechanisms, which may refer to trackers, riders, or other types of mechanisms that allow for the timely recovery of investments for one or more specific expenditure items outside of base rates. Rate adjustment mechanisms can be designed to expire when the specific amount of cost recovery is satisfied and therefore may be particularly useful for storm response and resiliency programs,[7] as well as other programs supported by the EMP, such as renewable energy programs.[8] 

To read NJUA's full testimony, click here