SENATE, No. 594
STATE OF NEW JERSEY
INTRODUCED JANUARY 29, 1996
By Senator McGREEVEY
An Act concerning alternative regulation of gas and electric rates and amending P.L.1995, c.180.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Section 5 of P.L.1995, c.180 (C.48:2-21.28) is amended to read as follows:
5. a. An electric or gas public utility may petition the Board of Public Utilities to be regulated under an alternative form of regulation, for the setting of prices for all or a portion of its retail customer base, for the recovery in rates of a particular asset or expenditure, or for the purpose of creating incentives consistent with the provisions of this act. The public utility shall submit its plan for an alternative form of regulation with its petition. The public utility shall also file its petition and plan concurrently with the Director of the Division of the Ratepayer Advocate, or its successor. The public utility shall provide, within 15 days of the filing of its petition and plan, notice of the specific filing to the clerk of each municipality, to the clerk of each Board of Chosen Freeholders, and to each county executive, in the service territory of the public utility. The public utility shall also provide, within 15 days of the filing, public notice to its customers of the filing, either by notice in a newspaper that has a general circulation in its service territory or by bill inserts as directed by the board. The board shall review the plan and may approve the plan, or approve it with modifications, if the board finds, after notice and hearing, that the plan will provide benefits to customers of the public utility relative to the pre-existing regulatory standards embodied in Title 48 of the Revised Statutes based upon a finding that the plan:
(1) Is designed to achieve the State's objective of producing lower rates for New Jersey consumers;
(2) Will provide incentives for the utility to lower its costs and rates;
(3) Will provide incentives to improve utility efficiency and productivity;
(4) Will foster the long-term production and delivery of electricity or natural gas in a manner that will improve the quality and choices of service;
(5) Includes a mechanism for the board to monitor and review the plan on a periodic basis over its term and to take appropriate actions if it is found that the plan is not achieving its intended results;
(6) Will maintain or improve pre-existing service quality standards, except that an individual customer may agree to accept lower quality service. A public utility shall continue to provide safe, adequate and proper service pursuant to R.S.48:2-23;
(7) Will not result in cross-subsidization among or between groups of utility customers, or between the portion of the utility's business or operations subject to the alternative form of regulation and the portion of the utility's business or operations that is not subject to the alternative form of regulation;
(8) Will reduce regulatory delay and cost;
(9) Is in the public interest and will produce just and reasonable rates; and
(10) Will enhance economic development in the State.
The standards established by the board pursuant to paragraphs (1) through (10) of this subsection shall be adopted as rules or regulations pursuant to the provisions of the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.).
b. Consistent with the provisions of this act, and provided that the plan meets the standards established in subsection a. of this section, the board may approve a plan submitted by a gas or electric public utility for an alternative form of regulation that permits a gas or electric public utility to establish a rate for a group of retail customers without a finding of rate base and reasonable rate of return pursuant to the pre-existing provisions of Title 48 of the Revised Statutes, if the board determines that the rate being charged by the utility to a retail customer is no lower than a minimum price that is determined by the board to prevent anti-competitive pricing and that:
(1) The group of customers has access to a competitive market for supply of power to its site and that market pricing for that group of customers is thereby appropriate; or
(2) The group of customers has otherwise voluntarily agreed in writing to accept a price that has not been established based upon rate base and reasonable rate of return standards pursuant to Title 48 of the Revised Statutes; or
(3) At the time of the plan's approval, the level of retail prices of the utility for the group of customers is determined to be reasonably reflective of the level necessary to produce a fair and reasonable rate of return pursuant to a current evaluation under pre-existing standards of Title 48 of the Revised Statutes, and that the plan provides mechanisms for prospective adjustments to rates that will track trends in utility rates.
c. Consistent with the provisions of this act, and provided that the plan meets the standards established in subsection a. of this section, the board may approve a plan submitted by a gas or electric public utility for an alternative form of regulation for a newly-constructed or acquired energy and capacity supply of a gas or electric public utility, including any transmission facilities directly associated with a generating unit, which regulation provides for a revenue requirement calculation that differs from the rate base, rate of return formula required by pre-existing standards of Title 48 of the Revised Statutes, if the board finds that:
(1) An asset, commodity or service comparable to that being provided by the utility could have been obtained from any one of many purveyors or suppliers in a competitive marketplace, and an opportunity was afforded those purveyors or suppliers to offer such an alternative source of energy and capacity supply; and
(2) The cost being charged to consumers by the utility under the alternative plan reflects the market price for that asset, commodity or service.
d. An alternative regulation plan as provided for in this section shall not include any mechanism for:
(1) Recovery of revenue erosion from other ratepayers; or
(2) A reduction in the gross receipts and franchise tax.
e. The board may require an independent audit or such accounting and reporting systems from electric and gas utilities as are necessary to allow a proper allocation of investments, costs or expenses for all services provided under the provisions of this act that are subject to the jurisdiction of the board.
f. Any plan for alternative regulation proposed by the board that does not conform to the standards of a rate base and reasonable rate of return pursuant to the provisions of Title 48 of the Revised Statutes shall be transmitted to the Senate Natural Resources and Economic Development Committee, or its successor, and to the Assembly Environment, Science and Technology Committee, or its successor, for review. Such a plan shall not be adopted prior to 120 days after the transmittal of the plan to the Legislature pursuant to this subsection.
g. Any plan for alternative regulation approved by the board pursuant to this section shall be transmitted directly to the Senate Natural Resources and Economic Development Committee, or its successor, and to the Assembly Environment, Science and Technology Committee, or its successor, for review. Such a plan shall not take effect prior to 120 after the transmittal of the plan to the Legislature pursuant to this subsection.
(cf: P.L.1995, c.180, s.5)
2. This act shall take effect immediately.
STATEMENT
This bill would require the Board of Public Utilities to transmit any plan it proposes for alternative regulation that does not conform to the standards of a rate base and reasonable rate of return pursuant to the provisions of Title 48 of the Revised Statutes to the Senate Natural Resources and Economic Development Committee and to the Assembly Environment, Science and Technology Committee for review. The board could not adopt such a plan prior to 120 days after its transmittal to the Legislature.
The bill also requires the board to transmit any plan for alternative regulation approved by the board pursuant to section 5 of P.L.1995, c.180 (C.48:2-21.28), directly to the Senate Natural Resources and Economic Development Committee and to the Assembly Environment, Science and Technology Committee for review. Any such plan could not take effect prior to 120 after its transmittal to the Legislature.
The bill also requires that any standards established by the board to implement the alternative regulation plan provisions of P.L.1995, c.180, be adopted as rules or regulations pursuant to the provisions of the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.).
This bill is intended to provide the Legislature with the opportunity to review any plan for alternative regulation proposed either by the board or a public utility. Such oversight is imperative given the magnitude of potential changes in the electric utility industry and the impacts such changes could have on New Jersey residents.
Requires BPU to submit alternative regulation plans to Legislature for review.