On Appeal from the New Jersey State Board of Public Utilities.
Furman, Petrella and Ashbey. The opinion of the court was delivered by Furman, P.J.A.D.
Hilton New Jersey Corporation (Hilton) and Golden Nugget Atlantic City Corporation (GNAC) appeal from an order of the Board of Public Utilities (BPU) imposing upon them the cost of extension of Atlantic City Electric Company (ACE) transmission lines to serve their new casino hotel projects in the Atlantic City Marina area. Bally's Park Place, Inc. intervenes in support of Hilton's and GNAC's appeals.
ACE imposed the $3,400,000 cost of new electrical facilities upon Hilton and GNAC, less $200,000 credited against embedded rate base attributable to existing facilities, pursuant to its so-called rate base stabilization policy adopted in 1982. The new policy for the first time shifted the total cost of a line extension from ACE to large general service customers served by the extension. ACE's existing tariff in 1982 exempted customers from any capital contribution if the total cost of an extension was equal to or less than the anticipated revenue for the first three years of operation; it required posting of revenue bonds by customers to be discharged as revenue was generated. ACE's new rate base stabilization policy is applicable only to large general service customers, defined as customers, such as casino hotels, with a peak demand of one thousand kilowatts or more.
Hilton and GNAC, both large general service customers, brought proceedings before BPU under N.J.S.A. 48:2-27 challenging the requirement of ACE's rate base stabilization policy that they pay the total cost of the electrical extension to serve their new projects. N.J.S.A. 48:2-27 provides:
The board may, after hearing, upon notice, by order in writing, require any public utility to establish, construct, maintain and operate any reasonable
extension of its existing facilities where, in the judgment of the board, the extension is reasonable and practicable and will furnish sufficient business to justify the construction and maintenance of the same and when the financial condition of the public utility reasonably warrants the original expenditure required in making and operating the extension.
In applying N.J.S.A. 48:2-27 to the petitions of Hilton and GNAC, the reasonableness and practicability of the extension and the capacity of ACE to finance it are undisputed. The remaining issue is whether the extension would furnish "sufficient business" to justify its construction and maintenance at the sole expense of ACE.
After a plenary hearing, Administrative Law Judge Gindin recommended that BPU order ACE to pay for the extension to serve Hilton and GNAC. He concluded that Hilton and GNAC would provide sufficient business to justify the extension, that ACE's rate of return would not be adversely affected by the expenditure of funds to finance the extension and that ACE lacked authority to impose its rate base stabilization policy without hearing before BPU and BPU approval as a tariff amendment in accordance with N.J.S.A. 48:2-21(d).
BPU rejected Judge Gindin's recommendation. It held that the implementation of the rate base stabilization policy was within ACE's authority under the terms of its then existing tariff, was not unduly discriminatory against large general service customers as a class and was "consistent with the Board's commitment to cost-based rates and the ratemaking standards set forth in the Public Utility Regulatory Policies Act, 16 U.S.C.A. 2601 et seq. " BPU also held that any customer who is dissatisfied or aggrieved by the application of the rate base stabilization policy "has a remedy providing for Board review under N.J.S.A. 48:2-27." Before us BPU defends its order based upon the assumption that it shields existing customers from rate increases by minimizing ACE's capital investment.
The cited Federal Act, which is advisory as to State public utility regulatory ...