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New Jersey Natural Gets Nod to Fully Unbundle System

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 date.

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. Downes.

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 subsequently 85/15.

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&ampG) in New Jersey.

Susan Parker

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