EDISON – Senator Barbara Buono today urged the state Board of Public Utilities to withhold approval of any pending rate increases for Jersey Central Power & Light until it determines whether the utility has overcharged its New Jersey customers by tens of millions of dollars while failing to invest adequately in the infrastructure and staffing needed to restore service quickly after major storms.
“There is no way that the BPU should consider JCP&L’s pending request for a rate increase to cover the $164 million cost of Hurricane Irene and the October ice storm in 2011 until after it resolves the serious charges brought by the Division of Rate Counsel against the company,” Buono said.
Buono noted that Stefanie Brand, the Christie administration’s rate counsel, determined last April – six months before Hurricane Sandy — that JCP&L, which is owned by Ohio-based FirstEnergy, was earning excess profits while failing to deliver sufficiently reliable service, and appropriately requested a full review of the utility’s base rates which has yet to be completed.
“The Division of Rate Counsel’s energy consultant determined that JCP&L took up to $90 million more from its New Jersey customers than it should have in 2010,” Buono said. “That represented a 12.37% rate of return on investment for the Ohio-based conglomerate from its New Jersey customers, far higher than the 8.75% profit authorized by the New Jersey BPU.”
Buono noted that Robert Henkes, the Division of Rate Counsel’s outside expert, found that JCP&L’s 12.37% profit far exceeded the “zone of reasonableness,” compared to the 8.21% earned by PSE&G, the state’s largest utility with almost 2 million electricity customers; the 8.21% profit earned by Rockland Electric in North Jersey; and the 8.69% rate of return for Atlantic City Electric Company.
“But just as troubling are the allegations that JCP&L’s failure to adequately restore service after Hurricane Irene and the major ice storm was a result of a failure to invest adequately in infrastructure, of staffing cuts made after JCP&L’s acquisition by FirstEnergy, and of the inability of the Ohio-based company to plan for a multi-state crisis like the one we just experienced,” Buono said.
Buono noted that the BPU’s August 9, 2011 report on the performance of the state’s electric utilities in the major storms of 2011 was particularly critical of JCP&L, which has 1.1 million customers in New Jersey, and that citizen complaints at the public hearings following those storms were directed almost entirely at JCP&L.
Brand, the Division of Rate Counsel director, wrote in her 2011 petition challenging JCP&L’s rates that “one way for a utility to increase its rate of return for its investors is to reduce its investment in the plant and equipment needed to provide its customers with safe, adequate and proper service.”
Buono said the BPU’s review of utility performance during the 2011 storms specifically required JCP&L to “provide a detailed staffing review that explains the decreases in operations headcount.” Since 2002, JCP&L cut its operations personnel by 12%, its logistics personnel by 26% and its customer service personnel by 27%, the BPU study found. PSE&G’s staffing level since 2002 had remained unchanged.
“We are grateful to JCP&L’s employees, like those at PSE&G, Atlantic Electric and Rockland, who worked long and hard to restore service to consumers,” Buono said. “But it is critical that our review of JCP&L’s performance in the aftermath of Hurricane Sandy focus on just where and when FirstEnergy allocated its resources, and whether New Jersey’s needs got the proper attention.”