Stakeholders say NJ BPU energy efficiency proposal needs to protect low-income customers from higher bills
The New Jersey Board of Public Utilities (BPU) issued a proposal that sets a framework for how energy efficiency will help meet the state’s clean energy goals, but stakeholders say the plan should go further to incentivize utilities to make investments in energy efficiency programs that will lower the utility bills of low-income residents.
New Jersey Gov. Phil Murphy signed the Clean Energy Act into law in May 2018, setting goals to build sustainable energy infrastructure, grow the energy economy, create well-paying jobs, and reduce carbon emissions. The state hopes to achieve 100 percent clean energy by 2050.
The Clean Energy Act directs the BPU to enforce a 2 percent annual reduction of electricity usage in the prior three years within five years of implementation.
The Straw Proposal for New Jersey’s Energy Efficiency and Peak Demand Reduction Programs, released this spring, aims to achieve a number of goals to help implement the Clean Energy Act, some of which include universal access to energy efficiency programs for all New Jersey residents and businesses; lowering energy costs for all ratepayers, with a focus on low-income communities; reduced costs for energy savings; and increased job opportunities within the industry. Specifically, the proposal includes recommendations related to program design and administration, mechanisms for the recovery of costs associated with energy efficiency and peak demand reduction programs, and establishing performance targets and metrics, among other items.
Public Service Electric and Gas Co. (PSE&G), New Jersey’s largest gas and electric delivery utility, released plans in 2018 for an expanded energy efficiency program, where it would invest $2.8 billion over six years.
“PSE&G’s energy efficiency proposal is designed to help New Jersey meet its clean energy targets, create jobs and train residents of low-and-moderate income communities to fill them, and help participating customers save on their utility bills,” said Michael Jennings, communications lead, Public Service Electric & Gas, at PSEG. “Those goals can best be achieved through a six-year program, rather than the shorter, three years that has been proposed.”
Although committed to energy efficiency programs, electric utilities are concerned about the state’s suggested timeline, largely due to how a shortened amortization period could be detrimental to their low-income customers.
The BPU’s proposal states that program investments would be amortized over a seven-year period. “This treatment provides benefits to both the utility and ratepayer, as the utility will recover its energy efficiency program investments more quickly while reducing the higher total interest cost and revenue requirement needed from ratepayers. Additionally, this will reduce the immediate rate impacts by spreading the cost of measures over a set period of time that better matches program costs with benefits.”
However, PSEG’s Jennings said, “To minimize impacts on customers’ bills, program costs should be amortized over 15 years (the average useful life of equipment in the program), not the arbitrarily short seven years proposed. The longer time frame more closely aligns with the state’s five-year targets and is critical to achieving energy efficiency’s economic and job creation potential.”
Low-income customers could struggle with any increases in rates.
In a May 27 letter to Gov. Murphy, the New York-Tri-State Chapter of the National Association of Minority Contractors (NAMC) noted that to meet and exceed projected energy efficiency adoption goals, significant capital investments will be required.
“According to the Straw Proposal, electric and gas utilities will play a major role in funding energy efficiency programs and the BPU will allow utilities to receive a return on equity (ROE), minus a BPU levied disincentive – and does not motivate utilities to make the types of capital investments required to achieve energy efficiency saturation in targeted communities – and will stunt potential growth in minority contracting.”
The letter continued: “NAMC supports proposals to allow a full ROE and would further recommend utilization of extended amortization periods as utilities recover costs through rates. Longer amortization better protects consumers from rate spikes and treats energy efficiency investments similar to other utility infrastructure projects.”
A separate letter to the governor signed by a number of advocacy groups, including the African American Chamber of Commerce of New Jersey, the NJ State Conference – NAACP, the Latino Action Network, and the Hispanic Chamber of Commerce of New Jersey, among others, also addressed the BPU’s Straw Proposal and the disparity it could cause for underrepresented communities.
“Utilities share in the State’s responsibility to increase the focus on energy efficiency programs as an additional means to reduce carbon emissions,” the letter said. “Still, the BPU must be willing to incentivize utilities to make the needed investments in energy efficiency programs that will lower the utility bills of low-income residents while creating economic opportunities for underserved communities.”
