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NJ's biggest utility plans $4B upgrade after Sandy

Published on NewsOK Modified: February 20, 2013 at 2:51 pm •  Published: February 20, 2013

The New Jersey International Brotherhood of Electrical Worker also supported it, saying it would create 5,800 jobs. And the New Jersey Building and Construction Trades Council also came out in support, saying it would provide an adrenalin shot to the state economy.

The proposal requires approval of the state Board of Public Utilities. A spokesman said the board cannot comment on matters before it.

Generally, there's an incentive for investor-owned regulated utilities like PSE&G have to invest in large projects such as power plants, transmission lines and substations, because that's how they can best increase profits for shareholders.

Regulators allow utilities to earn a greater rate of return — typically around 10 percent — for big capital-intensive projects than for simply delivering electricity. The reason is that regulators need to give utilities an incentive to invest in big-ticket items that could improve the system. New Jersey does not have a set rate of return on infrastructure investments, but rather decides them on a case-by-case basis.

Investors cheer when these projects are allowed because they increase electric rates. But they are not always good news for customers. Even if the proposed project does not raise utility bills, it would keep them from dropping as much as they otherwise would because the surcharges that disappearing in 2014 and 2016 that together account for more than 7 percent of the average utility bill.

Jennifer Kim, state director for the liberal consumer protection and environmental organization New Jersey Public Interest Research Group, said that she wants to see an electric system more able to weather bad storms, but she is skeptical about the claim that ratepayers won't see their bills rise. She also said she wants to make sure the project is closely examined and that the company pays for some costs out of what it's already collected from customers.

"Shouldn't some of this stuff have been taken care of already?" she asked.

PSE&G's Izzo said in a conference call that the company has spoken with officials, but he has not asked the governor to pre-approve the upgrade plans.


AP Business Writer Jonathan Fahey in New York contributed to this report.