Press Release

DIVERSE COALITION CALLS ON ADMINISTRATION TO FREEZE PSE&G’S UTILITY RATES

Contact: Elvin Montero

609.392.4214

emontero@chemistrycouncilnj.org

Ev Liebman

609-234-2741

Ev@njcitizenaction.org

Diverse coalition calls on administration to freeze PSE&G’s utility rates until the conclusion of an investigation of PSEG Power’s failure to pay more than $300 million in Societal Benefits and Regional Greenhouse Gas Initiative Charges, and seeks to end all unfair and improper ratepayer subsidies of PSEG Power.

Wednesday, May 26, 2010 – (Trenton, NJ) – This morning New Jersey Citizen Action, NJ Environmental Federation, the NJ Chapter of the Sierra Club,  Lutheran Government Ministries,  Environment New Jersey, New Jersey Gasoline-C-Store-Automotive Association, and the Chemistry Council of New Jersey joined together to call upon the AG’s Office and Board of Public Utilities to provide relief to NJ ratepayers stemming from PSEG Power’s nonpayment of the Societal Benefits Charge and other utility surcharges for the last eight years, resulting in combined ratepayer subsidies of PSEG Power of more than $300 million, according to some estimates. 

During PSE&G’s pending rate case before the Board of Public Utilities-- in which the company requested a rate increase in the hundreds of millions of dollars and unprecedented and unwarranted formula rates that would literally guarantee the company’s profits—it was discovered that PSEG Power, the generation  affiliate of the Public Service Enterprise Group responsible for most of the company’s record profits, has improperly benefited from highly favorable utility charges from its affiliate, the Public Service Electric and Gas Company. These benefits include below-cost utility gas service and failure to charge the Societal Benefits Charge and other utility surcharges that fund the State’s low income benefits programs and the BPU’s Clean Energy programs. By statute, the Societal Benefits Charge is non-bypassable, meaning that it is a charge that must be paid by all utility customers.

“There is something wrong when PSEG Power, one of our state’s largest and most profitable companies doesn’t have to pay the same bill as the rest of us,” said Ev Liebman, director of organizing & advocacy for NJ Citizen Action. “I’m one of 1.7 million PSE&G gas consumers who is required to pay my entire gas bill – why aren’t they? Many, especially residents lower on the economic ladder, are having real trouble paying high utility bills.  And if we don’t, we get shut off and can’t heat our homes or have to close our businesses.  Public Service doesn’t need any special treatment.  The government should freeze our rates at least  until this mess is sorted out, Public Service pays us back for the millions and millions of charges they owe and start paying their fair share.”

Testimony in the PSE&G rate case establishes that this Fortune 500 Company has enjoyed an enormous competitive advantage over its competitors and has benefitted from hundreds of millions of dollars in subsidies from unsuspecting ratepayers of all rate classes. In the rate case, PSE&G admitted that PSEG Power has never paid the SBC.  There is no dispute that the Board of Public Utilities never authorized PSE&G to waive PSEG Power’s payment of the SBC and other charges. In fact, PSE&G has also admitted that neither PSE&G nor PSEG Power even discussed with the BPU or the Division of Rate Counsel whether it was appropriate for PSEG Power not to pay the SBC and other charges.

"PSEG stands for Public Subsidy Energy Group because when they do not pay their taxes others do, so we end up subsidizing PSE&G," said  Jeff Tittel, director of the NJ Sierra Club.  “It is unconscionable for PSEG to be tax dodger when the state is broke and the governor is taking money from the Clean Energy Programs and the BPU is cutting rebates.  The BPU instead of gutting programs should be going after PSE&G for the money they owe. It is really aggravating when PSE&G is making record profits and raising rates."

PSEG Power also continues to receive considerable ratepayer subsidies in the form of so-called stranded costs, which purportedly compensate PSE&G for the “reduced” value of its generating plants caused by the creation of a competitive electricity market. Of course, these power plants, now owned by PSEG Power, have for years produced record profits for the company. Clearly, there was no loss of value of these plants, yet ratepayers continue to provide huge subsidies that support PSEG Power’s operation and huge profits.

Given this record of consumer rip-offs, we support Senator Smith’s call for an investigation of these serious circumstances by the Attorney General’s office.

New Jersey electricity rates are among the highest in the nation, even before the charges at issue are added to a ratepayer’s bill. Residential and commercial ratepayers pay rates that are more than 40% above the national average, and industrial rates are 60% above the national average. Even before the economic downturn that has affected us all, New Jerseyans have struggled to pay high electricity bills.  The state’s high energy rates continue to be a burden on residents and businesses alike, and put the state at an economic disadvantage when competing for new business investment. The use of improper subsidies like these significantly increases the already onerous cost of energy to ordinary citizens and result in windfall profits to PSEG Power.

“According to their advertisements ‘PSEG is one of the few firms in the country, and the only one in New Jersey, that has paid dividends every year since 1907’. By failing to pay the SBC charge for the last decade to the tune of more than $300 million, and collecting billions of dollars in so-called stranded costs to compensate PSE&G for generating plants that are the main earnings driver for the Public Service Enterprise Group, you can appreciate how the company has been able to maintain its enviable financial record during these turbulent economic times.  The company has benefitted from huge subsidies that would be the envy of any of my member companies that are struggling to keep more than 63,000 people employed in New Jersey while being strangled by the high energy costs in the state,” said Hal Bozarth, executive director of the Chemistry Council of New Jersey.

After posting record profits in excess of $1.2 billion in 2009, Public Service Enterprise Group has continued to post record profits in 2010, reporting First Quarter 2010 Net Income and Income from Continuing Operations of $491 million or $0.97 per share a 10% increase compared to the same time last year. These windfall profits, which occurred at the height of the current recession, were caused in part by discriminatory rates being made available to PSEG Power, the primary earnings driver of Enterprise Group, and Power’s failure to pay its fair share of SBC and other costs. These practices must be investigated and stopped.

"Fortune 500 PSE&G's refusal to pay their fair share that struggling residents and business pay without complaint is the height of arrogance and undermines our state's dire need to transition to a green 21st century economy with all its corresponding benefits to the economy and our environment, said David Pringle, campaign director for NJ Environmental Federation. “PS needs to pay up and the appropriate authorities need to ensure that PS does, as well as, investigate to ensure there aren't others doing the same and that this doesn't happen again; kudos to NJ Spotlight for uncovering this."

While PSEG attempts to dismiss as “shoddy reporting” the news article by Tom Johnson that exposed PSE&G’s shoddy business practices, we commend this courageous reporter and encourage his efforts.  We reject PSE&G’s call to dismiss this reporting, and the practices that it has exposed, as we believe strongly that the allegations regarding PSE&G’s conduct are serious and clearly merit further investigation.   That is why we have joined together to bring further attention to this issue and to encourage this administration, and in particular the Attorney General’s Office, to investigate whether the alleged improper practices have occurred and, if so, to compel PSE&G and PSEG Power to pay back the more than $300 million in subsidies that were wrongfully appropriated from the utility’s unsuspecting ratepayers.

"This is an outrage," said Matt Elliott, clean energy advocate for Environment New Jersey.  "New Jersey's clean energy program benefits everyone in the state.  And every energy customer pays into the program for that very reason. Except, it seems, PSEG - one of the state's most profitable companies. PSEG cannot be allowed to profit by not paying its fair share of the SBC, which funds clean energy programs in NJ, so we support Senator Smith's call for a thorough investigation of this matter. The clean energy program has successfully reduced state-wide energy demand, promoted clean energy alternatives, and supported hundreds of new green companies in NJ.”

About New Jersey Citizen Action

New Jersey Citizen Action is the state’s largest independent citizen watchdog coalition representing 100 affiliated organizations and tens of thousands of family members.

About the Chemistry Council of New Jersey (CCNJ)

The PUBLIC SERVICE RATE DODGE

End the Ratepayer Subsidization of the Giant, Multi-Billion Dollar Public Service Corporation

Information courtesy of NJ Citizen Action

What is the Societal Benefits Charge? New Jersey’s 1999 electric utility deregulation law, (The Electric Discount and Energy Competition Act, EDECA) established a Societal Benefits Charge  (SBC), to be paid by electric and gas customers  to fund programs benefitting both residents and businesses including:  Nuclear plant decommissioning, the Universal Service Fund,  Remediation of manufactured gas plant sites, Consumer Education and New Jersey’s Clean Energy Program 

The law establishes that the SBC in non-bypassable.  This means that all utility customers are required to pay the charge. 

Who is PSEG Power?  As a result of deregulation Public Service Electric and Gas restructured as a company.  PSEG Power became a major unregulated independent power producer in the U.S. Public Service Electric and Gas (PSE&G) remains a New Jersey regulated, investor owned electric and gas distribution company.   Both companies are wholly-owned subsidiaries of the Public Service Enterprise Group which has over $28 billion dollars in assets  PSEG Power has been the company’s profit driver for many years.  Recently the company reported annual operating earnings of approximately $1.2 billion.

PSEG Power is PSE&G’s largest gas customer, accounting for approximately 30% of the total amount of gas it distributes.   PSEG Power uses the gas it buys from PSE&G to generate electricity at its gas –fired generating plants.  

How is the SBC Charge Calculated?  The SBC is a per kwh/therm charge that, according to the Board of Public Utilities, (BPU), is approximately 3% of a customer’s energy bill. The charge is calculated by determining the amount of revenue needed to support the Societal Benefit programs and dividing that amount by the volume of gas delivered to residential, commercial and industrial customers.  . 

Has PSEG Power ever paid the SBC?  No and PSE&G has never reported or included the volumes of gas it delivers to PSEG Power in its calculation of the SBC charge imposed on all the rest of its customers.  This means that the SBC charge is set higher than it should be for everyone else.  PSE&G’s other ratepayers, who are responsible for only 70% of the company’s gas volumes are paying 100% of the utilities SBC requirements.    This differential represents an extraordinarily huge subsidy (windfall) paid by PSE&G’s other ratepayers to PSEG Power.  This also means that PSE&G has for years charged PSEG Power a below cost, highly favorable rate that is not available to other competitors or customers.  

It has also recently been revealed, as part of the state’s review of PSE&G’s pending request for a more than $200 million rate increase, that PSEG Power has never paid the Regional Greenhouse Gas Initiative (RGGI) charge, established by the legislature in 2008 or the Capital Adjustment Charge, (CAC) which is paid by other PSE&G customers to compensate the utility for its infrastructure investment.

When should PSE&G have begun charging PSEG Power the SBC?  During NJ’s deregulation transition period to retail competition the BPU allowed PSE&G to charge PSEG Power a discounted rate until 2002.  The BPU Ordered that PSE&G cease providing the preferential discounted rate to PSEG Power after July, 2002. 

What is the total amount of money PSEG Power owes in unpaid Societal Benefits charges?  Based on documents in the current rate case proceeding, it is estimated that PSEG Power’s SBC obligation for 2008 alone, a year in which it transported 89 million dekatherms of gas, should have been more than $47 million. The total obligation, since July 2002, could reach $300 million.

Has Public Service requested a waiver or other forms of rate relief that would allow PSEG Power to be excused from paying the SBC?   No.

How many gas customers does PSE&G have?  1.7 million gas customers across the state from Bergen to Gloucester counties.