This week, the New Jersey Board of Public Utilities approved procuring a consultant to examine alternative utility business models as a mechanism to drive down electricity costs for New Jersey customers.
The consultant will evaluate a range of potential regulatory reforms, including performance-based ratemaking — which ties utility profits to outcomes like reliability and customer savings rather than simply how much they spend — as well as multi-year rate plans, reductions to utility returns on equity, least-cost resource testing, and securitization tools.
The goal is to identify which combination of changes offers the greatest long-term savings for ratepayers while providing certainty for the industry and encouraging important investments to ensure reliability of the system.
“The BPU is committed to Governor Sherrill’s affordability agenda and is looking at every opportunity to drive down electricity rates,” said NJBPU President Christine Guhl-Sadovy. “This study will result in a concrete plan to address how the utility business model can better serve customers throughout the state.”
The study is another part of Sherrill’s response to address the electricity affordability crisis. It was ordered by her first executive order 1, signed Jan. 20 and gave the board 180 days to complete the analysis.
Electric delivery charges — the portion of the bill covering the poles, wires and infrastructure that bring power to homes and businesses — have been climbing steadily. Paired with the skyrocketing supply costs related to the PJM capacity auction, bills have become unaffordable for many residents. While the PJM price collar has kept supply rates relatively stable, the BPU is looking at all costs to customers to advance affordability.
The BPU wants to better understand how much of that increase is driven by the way utilities are regulated — and what a different approach might mean for customers’ bills in the future. The study will not change rates immediately, instead it is designed to provide data-driven options to reduce long-term bill pressure while maintaining safe, reliable service, according to the first executive order.
This RFQ, approved during the board’s regularly scheduled agenda meeting Wednesday, is part of a broader effort by the Sherrill administration to tackle rising electric costs on multiple fronts. The resulting study will focus on the longer-term question of whether the underlying business model itself needs to be changed.
The BPU action on the governor’s first executive order follows its request for information in response to Sherrill’s second executive order earlier this month to the state’s four electric distribution companies — Atlantic City Electric, Jersey Central Power & Light, Public Service Electric & Gas and Rockland Electric Company — to explore opportunities to modernize New Jersey’s electric grid and accelerate the interconnection of distributed energy resources.
That RFI, signed on Jan. 20 the day Sherrill was inaugurated, directs the electric distribution companies to provide comprehensive written responses within 30 days addressing compliance with interconnection regulations, opportunities to improve efficiency and strategies to support distributed energy resources development on constrained circuits.
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