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New Jersey on the Verge of a Deregulation Outbreak

New Jersey on the Verge of a Deregulation Outbreak

Legislation with drop-dead dates for 100% gas and electric deregulation continued to march through the New Jersey General Assembly Friday, as the state senate's Economic Growth Committee agreed to send a bill to both the senate and assembly floors for a vote on Tuesday. If passed, the bill would force the state's gas industry to allow supply competition statewide starting Dec. 31 and statewide electric generation competition starting Aug. 1. For it to become law, the bill needs to win a simple majority in both houses.

"Our state is serious about fair competition and this bill reflects our dedication to energy customers," said Brett Hall, a spokesman for New Jersey's Board of Public Utilities (BPU). "If this bill is accepted, New Jersey will have mandatory energy customer choice by the year 2000."

The bill requires the four main gas utilities in the state, South Jersey Gas, New Jersey Natural, NUI-owned Elizabethtown, and Public Service Electric &amp Gas (PSE&ampG), to unbundle the commodity side of their service. The utilities still will provide transmission and distribution. The bill gives the BPU full authority to decide the amount of stranded costs, but Hall said that all parties involved have been filing with the board and that the BPU staff will take those filings under advisement. Provisions require the board to review the utility affiliate code of conduct that exists for industrial and commercial customers, so that it will also cover the residential arena. It requires the utilities to be suppliers of last resort and states the intention of unbundling billing and metering three years after commodity competition.

"All the utilities had a fair shake at getting their voice heard with the BPU," said Steve Montovano, an Enron spokesman. "Everybody wanted the ball to move forward and I think they've come up with a good way of doing so. I don't anticipate any problems when the bill goes to a vote."

Joanne Brigandi, a South Jersey Gas spokesperson, said "Because the bill has not reached its final form, I can't comment on its present effects. What I can say is that South Jersey has supported almost everything in previous drafts. We had a task force that worked with legislators during the entire process and we've been happy with the results so far."

Brigandi added South Jersey has begun preparing for a competitive market place. She said South Jersey Energy, the utility's non-regulated affiliate, has started marketing different services that will help the utility stay competitive. One such service is weatherproof billing, a flat rate charged to customers each month, regardless of conditions or usage. The utility also partnered with Connectiv in the fall to begin a metering and billing outfit. "This partnership will put us in good position in this part of the industry, once it deregulates," Brigandi said. "Right now it just operates in Cape May county, but it should expand to our entire service area by April."

Lawrence Codey, president of PSE&ampG, said the bill will present a serious challenge to the utility. "This level of rate reduction means that, adjusted for inflation, our customers will have the lowest rates in the company's nearly 100-year history.It means that PSE&ampG alone will need to give consumers $200-550 million in annual savings over a period of four years in the face of a highly competitive market." According to Codey, the legislation calls for cuts totaling 19.5%. PSE&ampG also warned that, like everybody else, it has not seen the final version of the bill so this number may change.

The utilities are not the only companies gearing up for a deregulated Garden State. "Well, it is a little early to comment on specifics, but Enron does have a business plan set up for New Jersey," Montovano said.

New Jersey's gas industry generates $3.047 billion in annual revenues, the BPU said. Of the state's 8.1 million people, the industry serves 2.2 million residential customers, 231,000 commercial customers, and 3,100 industrials.

Electric On Fast Track

Besides California, New Jersey is the only state to propose full electric deregulation without requiring a large pilot program first. "I think that New Jersey's BPU is trying to stay away from recreating the wheel," said Montovano. "They looked around and saw many states with successful pilot programs, but where did the pilot programs lead? To open competition. Clearly the fastest path to deregulating a market is to start 100% from the get-go."

Many other deregulation programs allow utilities much larger time frames to fully deregulate. Pennsylvania, for example, began deregulation with utility pilot programs that started Jan. 1, 1997, and the state is still working towards full deregulation today. "We observed other states that phased deregulation in," said New Jersey Public Utility Board (PUB) spokesperson Linda Nowicki. "We felt that we would have more success if everybody was on the same page. That is the reason for such an early completion date."

In the entire state of New Jersey, only a small township in Elizabethtown held a pilot program. "It was small, about 22,000 people in a township aggregated together, and they saved between 4-5% on their electric bill," Hall said. "We allowed it to happen, but we didn't endorse it. It won't be indicative of a deregulated market. In this bill, we're mandating 5% savings off of everybody's bill in the first year. It also requires an additional 5% decrease over the next three years after that. Then the rates must be sustained at least on that level for another year. For New Jersey, that ain't bad."

John Norris

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