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Public Service Electric & Gas Co. v. Township of Woodbridge

Decided: February 2, 1976.


Matthews, Lora and Morgan. The opinion of the court was delivered by Morgan, J.A.D.


This appeal raises fundamental questions concerning the propriety of local taxation of structures closely associated with equipment used in the production of electric power at the Sewaren Electric Generating Station of Public Service Electric and Gas Company (Public Service). Consideration must also be given to the formula by which public utility property, found to be locally taxable, is to be valued for such purposes.

For the tax years 1970 and 1971, Block 760, Lots 1A and 9 in Woodbridge were assessed as follows:

Land Improvements Total

$959,300 $3,576,350 $4,535,650

The assessment on the land has not been contested and is not an issue on this appeal. Public Service's appeal to the Middlesex County Board of Taxation concerning the assessment as to the improvements on the land was dismissed. De novo appeals were then taken to the Division of Tax Appeals and a plenary trial on all issues was had before

Judge LaCorte, who retired before his report could be submitted. The matter was decided, therefore, without his participation, by the full Division on the transcript of the testimony and the briefs.

In its opinion dismissing the appeals the Division of Tax Appeals held locally taxable as real estate all of the structures located on the property. Public Service appeals.

The Sewaren installation is located on a parcel of land containing 87.15 acres located on the Staten Island Sound with access from Cliff Road in the vicinity of Central Avenue. It is bounded on the north by Smith's Creek and the property of Hess Oil and Chemical Co., on the east by the property of the Second Reserve Terminal, Inc., on the west by the property of the Township of Woodbridge, and on the south by the Staten Island Sound. The frontage on the Sound of approximately 2,500 feet is improved (in 1948) with a quay pier 50 feet in depth by 400 feet in length containing a total of 20,000 square feet.

The site is improved with the Sewaren installation which consists of a group of structures erected between 1948 and 1965 which are related in varying degrees to the company's power producing equipment. It is the nature and legal effect of this relationship which is one of the principal concerns of this appeal.

Located on the site are six turbine-generator units and the associated equipment necessary to produce electricity. Units 1-4 have a rated capacity of 454,000 kilowatts; Unit 5, adjacent to Units 1-4, is rated at 344,000 kilowatts. These five units are steam generating units in which water is heated in a boiler to make steam. The steam runs through a turbine which turns the generator to produce electricity. Unit 6 is a gas turbine essentially composed of four pairs of jet engines. Each pair is linked to a turbine and the four turbines to a generator.

Units 1-4 were placed in service during the years 1948-1951; Unit 5 in 1962 and Unit 6 in 1965. All of these units were built on the so-called unit principle whereby one boiler

supplies steam to one turbine which powers one generator, as distinguished from older types of stations in which a bank of boilers fed steam to a header which fed a group of turbogenerators. The boiler is specifically designed to meet the needs of the particular turbine it supplies. These needs determine the volume, temperature and pressure of steam. The boiler does not stand on a foundation but is suspended from a huge steel framework, and accessory components of the boiler are similarly mounted.

None of these units or their components were subjected to local taxation; all were clearly recognized as exempt from local taxation under the terms of the Gross Receipts Tax Act, N.J.S.A. 54:30A-49 et seq. The improvements assessed and which are the subject of this appeal include the brick structure which partially surrounds and supports Units 1-5, as well as several lesser structures most of which shelter equipment directly used in power generation.

Apart from the structure associated with Units 1-5 (about which more later) and the waterfront improvements, the other structures assessed as "buildings" consist of the following:

The structure partially enclosing Turbine No. 5 -- This is a one-story to five-story building with precast concrete slab walls, precast concrete plank roof, reinforced concrete floors and steam heat. It consists of a generator room, a turbine room and a boiler house, as well as a stairway and elevator. The only finished interior spaces are in the control rooms which are heated, air conditioned and have adjoining toilet facilities.

Two Screen Houses -- These two structures are at waterfront and provide shelter protection for the pumps and screening mechanism used in supplying processing water to the condensors. The first screen house serving Units 1-2 is built of brick over glazed tile with reinforced concrete roof, half steel plate flooring and half reinforced concrete flooring. The screen house serving Units 3-4 is one story, also

brick over glazed title, half steel plate and half reinforced concrete flooring.

Structure partially enclosing Turbine No. 6 -- This is a reinforced concrete structure that is mostly two stories with 32-foot height and part one story that is 13 feet high. This structure was especially built with interior air corridors for air-cooling the equipment and includes special construction designed to reduce the intensity of noise output from the jet engines which power this turbine.

Water Treatment Building -- This structure contains equipment used to remove minerals from water obtained from a utility source which is fed into boiler components of the generating equipment and turned into steam. This structure is approximately 12 feet high, 30 feet wide and 50 feet long and has a partial basement which contains a smaller part of the equipment to demineralize city water for use in the boilers.

The coal handling structures here are actually an assemblage of three structures. The first four generating units installed were originally designed to use coal to fire their boilers. Coal was then processed and fed from these structures into the boilers by an overhead gravity feed system. In 1966, because of environmental regulation, use of coal was discontinued and Public Service began to use oil and natural gas as fuel. None of the coal-handling equipment was, however, dismantled. A changeover to coal could be accomplished in a ...

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