Utilities can raise rates without NJ’s OK under rule
How would you feel if you were forced to loan the electric, water or gas company some money?
Probably not very good. You may not know it, but state law already makes it possible.
It gives utilities the ability to raise your rates temporarily if the state Board of Public Utilities takes more than eight months to decide on a company’s request to hike your bill. Once the board sets the utility’s rates, the utility would have to pay back the difference.
New Jersey’s utility companies have never taken advantage of that rule before, but that that may change. In March, Atlantic City Electric said it will implement its proposed increase, a 6.6 percent hike, in full if the case is not decided in nine months. A refund, based on the approved rates, would include interest, the company said.
In 17 rate cases filed by water, gas and electric utilities and decided in the last five years, only Jersey Central Power & Light’s request in 2012 took more than 10 months to resolve, according to the state Division of Rate Counsel. “It is very rare that a case goes beyond nine months,” state Rate Counsel Stefanie Brand said.
Now the Board of Public Utilities is doing something that has consumer advocates pretty worried. It’s preparing regulations that would guide how utilities can charge you an interim higher rate if a request takes longer than eight months to decide.
“It is basically forcing ratepayers to lend the utility money so they can get by but the ratepayer has to endure the hardship,” Brand said.
Customers would “be used as banks,” echoed Evelyn Liebman, associate state director for advocacy at AARP New Jersey. “Consumers would be forced to pay rates that are not reasonable and in many instances, people who are on low and fixed income, they would end up having to cut back on other things that they need, like food or medicine and their ability to make their rent or their mortgage payment.”
A representative of the utility industry says the regulations will clarify an existing law. “That legal authority was already there,” said Andrew Hendry, president of the New Jersey Utilities Association. “It’s old language in the law and that creates a lack of certainty about implementing it.”
In a statement, BPU spokeswoman Susanne LaFrankie said the law doesn’t address the board’s concerns.
Without regulations, there’s no way to determine how a company may implement interim rates, or whether a utility can charge their customers the full requested increase or a lesser amount, she said. The law doesn’t specify whether a utility’s refunds would include interest either.
Utilities ask for permission to raise rates when the revenues they are collecting are not sufficient to run their business and obtain a regulated rate of return for investors. For instance, it can happen when a utility tries to recoup the amount spent on network upgrades, such as new electric wires on poles or gas mains underground.
However, Brand said, utilities typically ask for more money than they ultimately receive.
In each of the 17 cases decided in the last five years, the rate increase approved by the BPU was “significantly less” than what was originally requested. For instance, in 2012, JCP&L asked for a $31.47 million increase and the board ordered a $115 million decrease, Brand said in documents.
It’s not the only controversy JCP&L has faced of late. Watch the videos above to learn about the ongoing fight over its proposed power line stretching from Aberdeen to Red Bank.