New Jersey Natural Gas (NJNG) and South Jersey Gas (SJG) got a thumb’s up from the state’s Board of Public Utilities (BPU) Thursday to begin a three-year pilot that decouples utility distribution revenues from system throughput. The measure is intended to remove the disincentive to the utilities to promote conservation by consumers. Going forward, utility profits will be tied to the number of customers served thus allowing the companies to focus on encouraging conservation and energy efficiency among customers. Interest in such programs, known as “revenue decoupling,” has grown as high gas prices have spurred increased conservation by consumers, reducing throughputs and, hence, reducing distribution revenues when they are calculated on a volumetric basis (see Daily GPI, June 14).

The pilot, set to begin this month, was first proposed last December (see Daily GPI, Dec. 6, 2005). It replaces the existing weather normalization clause with a conservation and usage adjustment, covering variations related to weather and customer usage. The utilities filed their proposals Monday with the New Jersey Board of Public Utilities (BPU). The pilot proposals would establish benchmarks for customer usage, and every year, the utilities would compare actual results to the benchmark.

By eliminating the link between usage and margin recoveries, NJNG and SJG said they would be in better able to more aggressively and creatively encourage conservation and efficiency, while still maintaining a strong financial profile. No rates will be changed before Oct. 1, 2007, following a full year under the program.

NJNG will provide $2 million of initial funding for the programs, which will remain in effect through Sept. 30, 2009.

“This is an important milestone in the history of New Jersey Natural Gas and the future of our state,” said CEO Laurence M. Downes. “The issue of energy use is a pressing concern for our customers, company, state and nation. We cannot simply stand by and accept the status quo. New challenges require new ideas and new approaches. It is imperative for all of us, as we look to our future, to embrace conservation and preserve our natural resources.

In the coming weeks residential customers of both utilities will receive information on efficiency and conservation measures. Small commercial customers will receive information and estimated savings resulting from state and federal incentives for energy efficiency investments. Customers will be provided discounted conservation kits and the ability to sign up for free conservation information updates by e-mail as they become available.

NJNG also will implement a “One Price to Upgrade” offer for targeted residential customers to allow them to upgrade to a high-efficiency furnace, and for a period of time, provide 0% financing opportunities for the purchase and installation of qualified furnaces and boilers.

“High natural gas prices due to increased international demand with no concomitant increase in supply have had a substantial impact on New Jerseyans, and conservation and energy efficiency are key components towards mitigating that impact,” said NJBPU President Jeanne M. Fox.

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