NJ utility head calls for new rates to encourage conservation and green energy

The head of New Jersey’s largest utility called Wednesday for the state to move away from a century-old system that encourages utilities to sell as much energy as possible, and toward a new system that provides incentives for energy utilities to promote greater efficiency and conservation.

Ralph Izzo, president and chief executive of Public Service Enterprise Group, told a state energy forum that New Jersey should create financial incentives for utilities to help customers reduce at-home energy use, as well as expand access to renewable energy and new energy-saving technologies. PSEG owns Public Service Electric & Gas Co., which has 2.1 million electric customers.

“Customers’ demands are changing,” Izzo said at the forum in Mount Laurel, sponsored by the Chamber of Commerce of Southern New Jersey. “They want more reliability, they want more resilient power, they want cleaner energy, and they want access to smart technology to better understand their energy usage – all while keeping bills affordable.”

Izzo joined a chorus of utility executives across the nation who are pushing for increased “decoupling” of rates, to allow their companies to offset flattening or declining sales volumes as more customers conserve power or generate their own electricity with home solar systems. Decoupled rates allow utilities to pay for maintaining the power grid through fees that are disconnected from electricity usage.

In an interview, Izzo was unspecific about a suggested shape for a new rate model, and said he was hesitant to use the term decoupling because it provokes a “knee-jerk” reaction from some consumer groups that associate it with higher monthly customer fees.

Izzo said that although New Jersey had set aggressive goals for renewable energy, it has taken “only baby steps” to encourage energy efficiency, which is frequently the least expensive way to reduce consumption.

“Energy efficiency is the critical component that will drive the utility of the future,” he said. “The cheapest kilowatt remains the one that is not needed.”

In March, PSE&G filed a request with the state Board of Public Utilities to boost rates to raise $74 million for energy-efficiency programs, including extending previous programs for hospitals, multifamily dwellings, and government agencies, nonprofits, and small businesses in urban enterprise zones. It was the utility’s fourth energy-efficiency filing in a decade, and Izzo expressed frustration at the prolonged regulatory reviews they require.

“I marvel at the fact it did not just sail right through.” he said in the interview, calling the proposal a “no-brainer.”

“There’s billions of dollars of energy efficiency we should be doing, and we’re squabbling over tens of millions,” Izzo said.

“We have to tackle decoupling if we want to turn these programs from $70 million and $90 million into hundred of millions, or billions. And that’s where we continue to be frustrated,”  he said.

Izzo encouraged regulators to consider longer-term approval of energy-infrastructure projects. The BPU typically approves such projects in three-year increments, but Izzo argued that a longer-term approval would allow utilities to plan their purchasing and hiring more efficiently and create more jobs.

He also used the occasion to repeat his calls for greater support for the state’s nuclear plants, which he said were struggling to earn a competitive return in the face of a low-cost energy market driven by cheap natural gas prices. PSEG operates the giant Artificial Island nuclear generating site in Salem County, so the company has a strong incentive to maintain existing nuclear plants.