January 31, 2008 - 1:21pm
The buried story and the hidden energy tax
By Debbie HoltzResidential and commercial electric customers join forces to pull the plug on a billion buck boondoggle by NJ's largest utility company. And why isn't this front page news?
That’s the real point of Wednesday’s Star Ledger story about a Public Advocate-led ratepayer complaint against PSE&G for surcharges on electric customers to pay - again - for the utility giant's decades old power plants. Only problem is the story was buried inside the Business section, below the fold, and a mere three column inches.
There's a much bigger story here.Residential electric customer will be paying, on average, $60 a year to PSE&G until 2017 to pay for power plants that supposedly should be gathering cob webs as new competitors flock to NJ's energy industry. It's called Stranded Cost Recovery and it's part of the State's "Electric Discount & Energy Competition Act." PSE&G and the other NJ utilities whined to the Legislature that electric competition would cause power plants they previously built (and you and I paid for) to be shuttered for lack of customers.
The utilities wanted their shareholders to be made whole for earlier investments in generating facilities. Instead they're getting fat.
As the Ledger's Tom Johnson wrote: ". . . the plants, since spun off to an unregulated unit of PSE&G's parent company, have become hugely lucrative."
Heck, PSE&G's power plants are now selling electricity to the other NJ utilities too!
Here's the rundown:
Number of residential electric competitors vying for PSE&G customers: 0
Number of PSE&G electric customers at the beginning of electric competition in 1999: 1.9 million
Number of PSE&G electric customers today: 2.1 million
PSE&G stock price in 1999: $40
PSE&G stock price today: $100
PSE&G's ratepayer-financed Stranded Cost Recovery windfall: $1 billion
Credit the Ledger for at least covering the story and Johnson for clarity in reporting on a complicated issue. But give the story the placement it merits - - right up there with the costly proposed toll hikes.
Oh yeah, and it’s also not a bad idea to make the story more visible to “everyday” readers who are paying the PSE&G surcharge, not just the biz types who scan the financial sections of the newspaper.
Psst…tip to NJ media on another missed front page story: You may want to look at the hit to electric ratepayers of another of PSE&G's Energy Competition Act financial shell game. It's called a "securitization transition charge'' on customers' bills for the interest hedge from PSE&G's bond sale back in 1999 to cover the costs of the transition to deregulation. PSE&G made a bet to get paid by it's bond company if interest rates rose and made its borrowing costs too expensive. PSE&G's customers, not its investors, would foot the bill on the bond debt if interest rates went down. So guess who’s paying now?
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Why did you not complain in 1999
Back in 1999 the state passed the EDECA, Electric Discount & Energy Competition Act, which opened the electrical market to outsiders. At that time, PSEG was required to cap the price they charged for electric power, while allowing other companies to use their power lines to delivery power to the individual user. Something like what happened when the courts broke up AT&T.
Well, we all learned a lesson, and that is PSEG is very good at what it does, and that is deliver electric power at a very compeditive price to the citizens of New Jersey. The cost of this lesson is we now have to honor the provisions of the law that required capping of prices and depreciation of equipment (power plants for example).
Two examples show just how great this company is, and why it would be better to learn from how they run themselves, instead of trying to destroy them.
Remember back to the summer of 2003 and the great blackout? It was the outstanding efforts of PSEG, their people and equipment that allowed them to control and break the complete collapse of the electric grid down the eastern seaboard. They then turned around and were able to get the state of New Jersey powered up sooner than "anyone" else. This private, for profit company did this, not state authorities like New York Power Authority, who collapsed like a house of cards and tried to blame everyone else. Once proving that a private enterprise just seems to work better.
Secondly, just last week PSEG entered into further planning stages of using one of their newer, but highly expensive plants to generate electricity, to supply power to New York City. This plant uses natural gas, one of the most expensive energy sources to generate electricity. PSEG would still offer it's customers cheaper sourcing for electricity from it's other plants which use nuclear, oil and coal. Along with it's ability to pull power from the PJM Interconnection grid. This plan would allow them to better use their capital investment and thereby keep rates lower for both the users in New Jersey and New York.
The shareholders of PSEG deserve a return on the investment they have made in PSEG. A certain amount of that return was delayed when PSEG agreed to the provisions of the EDECA. Now it is time for that reward, so let the retirement plans, and individuals who invested in PSEG to collect.
"The only man who never makes a mistake is the man who never does anything."
--Theodore Roosevelt--
Sounds Like a "Free Lunch" to Me
Here is a prime example of where and when the media feels a story is lacking in Pizaaz or just too complicated for the reader to maintain focus, that it gets draged to the back of the news cycle.
The examples of goverment or public subsidies to private interests abound. "Free Lunch" which I have yet to pick up documents even more egregious examples. Such as professional sports, whose profits can be almost entirely traced back to the public subsidies they receive for stadiums and the like. This is a glaring contradiction to the "free market" types like above, but then again contradictions never seem to bother them much.
But hey, with a $6 billion budget defecit who's counting?