Public Service Enterprise Unit to Drive Gas System Upgrade
The primary subsidiary of Public Service Enterprise Group Inc. (PEG – Analyst Report) – Public Service Electric and Gas Company (PSE&G) – has reached a settlement with the New Jersey Board of Public Utilities (BPU) and the New Jersey Division of Rate Counsel to accelerate the Gas System Modernization Program of restoring aging gas pipelines. The $905 million agreement will be submitted to the BPU for final sanction in the weeks ahead.
PSE&G had filed with the BPU on Mar 2 for the approval of a $1.6 billion investment to replace 800 miles of gas mains and 55,000 steel service lines to homes and businesses over a five-year period.
However, with the new agreement, PSE&G will be able to replace up to 510 miles of gas mains and 38,000 service lines over a three-year period.
Initially, PSE&G’s residential gas heating customers may not witness a rate increase. However, these customers using 1,010 therms annually may observe their average monthly bill go up by 49 cents in 2017. Following the completion of the Gas System Modernization Program, the average monthly bill for these residential customers may increase by $4.82 or 1.5% over four years.
Per the agreement, PSE&G will earn a 9.75% return on equity on investments worth $650 million based on an accelerated recovery mechanism. The remaining sum of $225 million will be recovered in a base rate case expected to be filed in Nov 2017.
The Gas System Modernization Program will include the replacement of current mains and service lines with strong, durable plastic piping which will protect leakage and discharge of methane gas. This will increase the resiliency of gas systems, supporting safe, clean and reliable service in the future.
Management deems the current low levels of natural gas prices to be the best time to speed up this work. Moreover, the significant drop in natural gas prices has helped PSE&G to pass on the benefits to its customers. Recently, the utility revised its natural gas rates downward, making it the lowest to be charged by the company in the last 15 years.
Apart from the gas system upgrade, Public Service Enterprise’s New Jersey utility is also engaged in a variety of infrastructure and efficiency programs. For example, PSE&G’s $1.22 billion Energy Strong Program will allow the company to guard and strengthen its electric and gas systems against severe weather damage. The utility’s $400 million Energy Efficiency plan has helped its customers to save more than 180 million kilowatt-hours of electricity.