NGI The Weekly Gas Market Report
Legislation with drop-dead dates for 100% gas and electricderegulation continued to march through the New Jersey GeneralAssembly Friday, as the state senate’s Economic Growth Committeeagreed to send a bill to both the senate and assembly floors for avote on Tuesday. If passed, the bill would force the state’s gasindustry to allow supply competition statewide starting Dec. 31 andstatewide electric generation competition starting Aug. 1. For itto become law, the bill needs to win a simple majority in bothhouses.
“Our state is serious about fair competition and this billreflects our dedication to energy customers,” said Brett Hall, aspokesman for New Jersey’s Board of Public Utilities (BPU). “Ifthis bill is accepted, New Jersey will have mandatory energycustomer 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, andPublic Service Electric & Gas (PSE&G), to unbundle thecommodity side of their service. The utilities still will providetransmission and distribution. The bill gives the BPU fullauthority to decide the amount of stranded costs, but Hall saidthat all parties involved have been filing with the board and thatthe BPU staff will take those filings under advisement. Provisionsrequire the board to review the utility affiliate code of conductthat exists for industrial and commercial customers, so that itwill also cover the residential arena. It requires the utilities tobe suppliers of last resort and states the intention of unbundlingbilling and metering three years after commodity competition.
“All the utilities had a fair shake at getting their voice heardwith the BPU,” said Steve Montovano, an Enron spokesman. “Everybodywanted the ball to move forward and I think they’ve come up with agood way of doing so. I don’t anticipate any problems when the billgoes to a vote.”
Joanne Brigandi, a South Jersey Gas spokesperson, said “Becausethe bill has not reached its final form, I can’t comment on itspresent effects. What I can say is that South Jersey has supportedalmost everything in previous drafts. We had a task force thatworked with legislators during the entire process and we’ve beenhappy with the results so far.”
Brigandi added South Jersey has begun preparing for acompetitive market place. She said South Jersey Energy, theutility’s non-regulated affiliate, has started marketing differentservices that will help the utility stay competitive. One suchservice is weatherproof billing, a flat rate charged to customerseach month, regardless of conditions or usage. The utility alsopartnered with Connectiv in the fall to begin a metering andbilling outfit. “This partnership will put us in good position inthis part of the industry, once it deregulates,” Brigandi said.”Right now it just operates in Cape May county, but it shouldexpand to our entire service area by April.”
Lawrence Codey, president of PSE&G, said the bill willpresent a serious challenge to the utility. “This level of ratereduction means that, adjusted for inflation, our customers willhave the lowest rates in the company’s nearly 100-year history.Itmeans that PSE&G alone will need to give consumers $200-550million in annual savings over a period of four years in the faceof a highly competitive market.” According to Codey, thelegislation calls for cuts totaling 19.5%. PSE&G also warnedthat, like everybody else, it has not seen the final version of thebill so this number may change.
The utilities are not the only companies gearing up for aderegulated Garden State. “Well, it is a little early to comment onspecifics, but Enron does have a business plan set up for NewJersey,” Montovano said.
New Jersey’s gas industry generates $3.047 billion in annualrevenues, the BPU said. Of the state’s 8.1 million people, theindustry serves 2.2 million residential customers, 231,000commercial customers, and 3,100 industrials.
Electric On Fast Track
Besides California, New Jersey is the only state to propose fullelectric deregulation without requiring a large pilot programfirst. “I think that New Jersey’s BPU is trying to stay away fromrecreating the wheel,” said Montovano. “They looked around and sawmany states with successful pilot programs, but where did the pilotprograms lead? To open competition. Clearly the fastest path toderegulating a market is to start 100% from the get-go.”
Many other deregulation programs allow utilities much largertime frames to fully deregulate. Pennsylvania, for example, beganderegulation with utility pilot programs that started Jan. 1, 1997,and the state is still working towards full deregulation today. “Weobserved other states that phased deregulation in,” said New JerseyPublic Utility Board (PUB) spokesperson Linda Nowicki. “We feltthat 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 inElizabethtown held a pilot program. “It was small, about 22,000people in a township aggregated together, and they saved between4-5% on their electric bill,” Hall said. “We allowed it to happen,but we didn’t endorse it. It won’t be indicative of a deregulatedmarket. In this bill, we’re mandating 5% savings off of everybody’sbill in the first year. It also requires an additional 5% decreaseover the next three years after that. Then the rates must besustained at least on that level for another year. For New Jersey,that ain’t bad.”
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