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
"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 & Gas (PSE&G), 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&G, 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&G 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&G 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."