After working out a compromise on a divisive municipalaggregation issue, both houses of New Jersey’s state legislaturepassed identical deregulation bills Thursday, paving the way forelectric unbundling to begin Aug. 1 and gas unbundling to beginDec. 31. The senate passed the bill by a vote of 27-6, and theassembly passed their version by a count of 59-9, with 10abstentions. Gov. Christine Todd Whitman, who sources say helpedbroker the bill, has not said when she will sign the legislationinto law.

In early January, a similar bill was passed by the senate butrejected by the general assembly because of differences overmunicipal aggregation. The senate’s version required municipalitiesto aggregate customers by ordinance whereas the assembly wantedaggregation through a referendum. The two houses could not findcommon ground before the voting session closed for two weeks. Yetduring the hiatus, key players from both houses and the governorhammered out a compromise. The new legislation mandates a municipalordinance to select a supplier, but it also stipulates thatcustomers cannot be pooled unless they give the ordinance theirconsent. Residents who don’t respond to the ordinance are requiredto give written consent to the supplier they choose.

“The compromise properly recognizes the capabilities ofmunicipal officials to organize pools of residents to obtain thelowest rates possible for families,” said Senate Majority LeaderRichard Codey.

On the electric side, the bill mandates an immediate 5% cut incustomers bills and requires another 5% to be reduced over thefollowing three years. New Jersey’s electricity prices are 50%higher than the national average, one source said. Because thestate’s gas prices are in line with the national average, nostate-required discounts are included.

The bill sets up a rigorous time schedule for electric and gasutilities, yet it also leaves many questions unanswered. “.[T]hisbill is only a framework and gives the Board of Public utilities(BPU) the responsibility to create a successful competitiveelectric market,” said Steve Montovano, Enron’s director ofgovernment affairs. He added main deregulation issues, such asstranded cost recovery, utility affiliate codes of conduct,metering and billing unbundling, and an appropriate rate structurestill need clarification and organization by the BPU.

Another cloudy issue, Montovano said, is the bill’s “shoppingcredit” provision for electric utilities. The bill requires thederegulating electric utilities to offer these shopping credits tocustomers, which reflects an amount of money given to customers bythe utilities as an incentive to shop for a supplier. This is thefirst legislation to actually include the credit. The bill does notsay what the credit should be worth, and the BPU has yet to decide.

Some people involved with the situation expressed reservations.”Despite the fact the Legislature has adopted the bill, we continueto be concerned about the effect of rate reductions on reliabilityof service and jobs,” said GPU Energy spokesperson Elizabeth Ard.GPU operates the largest electric distribution system acrossPennsylvania and New Jersey. “Sustainable rate reductions plus theuncertainty of a possible further reduction that may result from ashopping incentive are of major concern to us,” said Ard.

Gas utilities were more bullish. “We support this landmarklegislation for recognizing that consumers want their utility asone of their choices,” said Laurence Downes, CEO of New JerseyResources Corp., parent company of New Jersey Natural Gas. “Ourcustomers have overwhelmingly expressed their desire to be able tochoose their natural gas and related services from the broadest ofchoices. This legislation gives them that choice.”

Laura Conover, a New Jersey Resources spokesperson, said oneadvantage this legislation provides is the ability for utilities tocompete in a deregulated gas market. “I know in Georgia, forinstance, the utilities weren’t allowed to compete. We’re gratefulfor the chance, and once the rules get set, we’ll come up with acompetitive strategy.” Conover said New Jersey Natural’s pilotprogram, which she said has saved customers 3-7% off their gasbills, demonstrated the public’s appetite for choice. The programstarted in April 1997 and allowed 40,000 people out of theutilities 360,000 customer base to choose suppliers. At last count,27,000 people had switched to one of eight suppliers.

PSE&ampG also voiced its support for the bill. “When thisprocess began over two years ago, the overriding goal was to createa plan that would be a solid foundation to support an opencompetitive market and allow an energy marketplace to mature. Webelieve this bill does that,” said Lawrence Codey, CEO. Yet, healso expressed reservations over the strain deregulation will puton PSE&ampG. “We must adapt all of our customer service systemswithin a few short months to allow for choice. We must act as abackstop if a third-party marketer fails to deliver as promised. Wemust maintain the physical infrastructure of pipes and wires sothat customers can continue to take safety and reliability forgranted.Its going to be an enormous challenge.”

John Norris

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