New Jersey Natural Gets Nod to Fully Unbundle System
The New Jersey Board of Public Utilities (BPU) last week
approved a comprehensive agreement with the regulated arm of New
Jersey Resources (NJR), New Jersey Natural Gas (NJNG), that would
put it on a fast-track to provide supplier choice to its
residential customers by Jan. 1.
The kick-off date for residential gas unbundling, however,
hinges on whether the BPU completes standards for marketers to
participate in unregulated energy markets and guidelines for a
customer-education program, said Laura Conover, a spokeswoman for
the LDC. If these are unfinished, the BPU could delay the starting
The agreement is a "significant step" for NJR since it makes the
company the first in New Jersey to voluntarily open all of its
markets to competition, said NJR Chairman and CEO Laurence M.
The agreement calls for NJR to provide customer-choice to
residential gas users almost a year ahead of the deadline specified
in major energy restructuring legislation that was introduced into
the state assembly last Monday. That bill would require the state's
gas markets to be unbundled by Dec. 31, 1999, and the electricity
market to be open to competition by June 1, 1999.
The effort to inject competition into the state's residential
market comes four years after NJNG unbundled its commercial gas
markets, and a little more than one year after it began offering
supplier choice to residential customers on a pilot basis.
Although customer choice is expected to come sooner for NJNG
customers than others in the state, the LDC's gas customers will
face higher costs over a three-year period due to a BPU-approved
3.5% hike in NJNG's levelized gas adjustment clause. An average
customer using 100 therms of natural gas per month -- and who uses
NJNG for all of their gas services -- will pay an additional $2.92
each month, according to the company.
However, the agreement also would enable NJNG to credit a
greater share of its off-system sales to offset price hikes through
2001, the LDC noted. Formerly it credited 80% of these margins to
reducing customers bills and 20% to shareholders, but the agreement
would change that sharing formula to 85/15 as of Oct. 1. Since the
program began in 1992, NJNG said it has credited more than $88
million from these sales to maintain stable prices for customers.
The company also plans to reduce the fixed costs by designing a
more competitive natural gas portfolio. It noted it will share
these savings with customers and shareholders, respectively, on a
60/40 basis during the first year of each transaction, and
The bill that has been introduced in the state Legislature would
not provide a guaranteed rate reduction for gas customers, but it
does call for a minimum rate cut of 5-10% for electricity
customers, said Paul Rosengren, a spokesman for Public Service
Electric and Gas (PSE&G) in New Jersey.
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