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In the Matter of the Petition

March 1, 2011

IN THE MATTER OF THE PETITION OF PUBLIC SERVICE ELECTRIC AND GAS COMPANY FOR APPROVAL OF CHANGES IN ITS ELECTRIC AND GAS SOCIETAL BENEFITS CHARGE RATES; FOR A CHANGE IN ITS ELECTRIC NON-UTILITY GENERATION TRANSITION CHARGE RATE; AND FOR CHANGES IN THE TARIFF FOR ELECTRIC SERVICE B.P.U.N.J. NO. 14 ELECTRIC AND CHANGES IN THE TARIFF FOR GAS SERVICE B.P.U.N.J. NO. 14 GAS.


On appeal from the New Jersey Board of Public Utilities, Docket No. ER09020113.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued January 31, 2011 - Decided

Before Judges Reisner, Sabatino and Alvarez.

Petitioner Public Service Electric and Gas Company (PSE&G or the company) appeals from a June 23, 2010 decision of the Board of Public Utilities (BPU): (a) disapproving the company's application to pass on to its ratepayers an assessment imposed by PJM Interconnection, L.L.C. (PJM) for PSE&G's share of the cost of a default by two other PJM-member companies; and (b) allowing PSE&G to recover 50% rather than 100% of the interest the company proposed to charge its ratepayers based on accounting entries in a bad debt reserve.*fn1

We conclude that the agency's decisions on both those issues fell within the ambit of its statutory authority and policy-making discretion and were supported by substantial credible evidence. Therefore, we affirm.

I

Both issues stem from policies the Board adopted to implement the Electric Discount and Energy Competition Act of 1999, N.J.S.A. 48:3-49 to -98 (EDECA). The background was addressed at great length in In re Public Service Electric & Gas Co.'s Rate Unbundling, 330 N.J. Super. 65, 83-92, 138-40 (App. Div. 2000), affirmed, 167 N.J. 377, cert. denied, Co-Steel Raritanv.New Jersey Board of Public Utilities, 534 U.S. 813, 122 S. Ct. 37, 151 L. Ed. 2d 11 (2001). It need not be repeated here in that level of detail. It is sufficient for our purposes to acknowledge that, along with introducing retail competition into the electric power industry, the Legislature authorized the BPU to devise mechanisms to allow existing public utilities to recover "stranded costs," N.J.S.A. 48:3-61, as well as costs associated with their ongoing obligation to participate in certain BPU-approved social programs, N.J.S.A. 48:3-60.

We will discuss each issue separately, but our decision as to each is informed by the same bedrock legal principles. Our review of the agency's decision is extremely limited. We will not reverse a decision of the BPU "unless it is arbitrary, capricious, or unreasonable or it is not supported by substantial credible evidence in the record as a whole." In re Pub. Serv. Elec. & Gas Co.'s Rate Unbundling, supra, 330 N.J. Super. at 123; see also In re Pub. Serv. Elec. & Gas Co.'s Rate Unbundling, supra, 167 N.J. at 385; In re Pub. Serv. Elec. & Gas Co. for Approval of Elec. & Gas Rates, 304 N.J. Super. 247, 264 (App. Div. 1997). And we must "give[] 'due regard' to the agency's expertise when this is a factor." In re Pub. Serv. Elec. & Gas Co.'s Rate Unbundling, supra, 330 N.J. Super. at 123; see also In re Pub. Serv. Elec. & Gas Co.'s Rate Unbundling, supra, 167 N.J. at 384.

We may set aside BPU orders only "when it clearly appears that there was no evidence before the board to support the same reasonably or that the same was without the jurisdiction of the board." N.J.S.A. 48:2-46; see In re Pub. Serv. Elec. & Gas Co.'s Rate Unbundling, supra, 167 N.J. at 393. Procedural defects warrant reversal only if "the irregularity or informality tends to defeat or impair the substantial right or interest of the appellant." N.J.S.A. 48:2-46; see In re Pub. Serv. Elec. & Gas Co. for Approval of Elec. & Gas Rates, supra, 304 N.J. Super. at 264.

"In rate-setting cases, where the administrative agency must balance competing consumer and utility interests, courts allow the agency 'the fullest exercise of administrative discretion.'" In re Pub. Serv. Elec. & Gas Co.'s Rate Unbundling, supra, 330 N.J. Super. at 106 (quoting In re Rockland Elec. Co., 231 N.J. Super. 478, 494--95 (App. Div.), certif. denied, 117 N.J. 129 (1989)); see also In re Pub. Serv. Elec. & Gas Co.'s Rate Unbundling, supra, 167 N.J. at 384; In re Pub. Serv. Elec. & Gas Co. for Approval of Elec. & Gas Rates, supra, 304 N.J. Super. at 264. The BPU is "the administrative charged with enforcing the [EDECA], [thus] its interpretation of the Act and its policy decision should be given great weight." In re Pub. Serv. Elec. & Gas Co.'s Rate Unbundling, supra, 330 N.J. Super. at 129.

II

The first issue concerns a Non-Utility Generation Charge (NGC), which is intended to reflect the utility's cost of buying energy from non-utility generators (NUGs) (e.g., co-generation companies). The Federal Public Utility Regulatory Policy Act of 1978 (PURPA), 16 U.S.C.A. §§ 824 to 824w, requires utilities such as PSE&G to buy some electrical power from NUGs, even though that power may be more expensive than power available on the open market. The Board authorizes PSE&G to re-sell that power to PJM, which operates a multi-state power grid. Along with many other utilities, PSE&G is a member of PJM.

Ordinarily, PSE&G can recover from its ratepayers the difference between what it pays the NUGs and the (generally lower) price it receives from PJM. See N.J.S.A. 48:3-61a(3) (authorizing utilities to recover "stranded costs" associated with NUG power purchase contracts). In this case, PJM reduced its total payment to PSE&G by the amount of an assessment which was based on defaults by other PJM members, as opposed to being based on the market price of NUG power.*fn2 PSE&G claimed it should be able to recover that ...


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