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State Of New Jersey Division of Ratepayer Advocate  


In the Matter of the Petition of New Jersey Natural Gas Company
for the Annual Review and Revision of its
Basic Gas Supply Service (BGSS) Factor for F/Y 2006

BPU Docket No. GR05060488

Freehold, New Jersey
December 6, 2005
7:00 p.m.

Good evening. My name is Sarah Steindel, and I am an attorney representing the New Jersey Division of the Ratepayer Advocate. Our office was created by the New Jersey Legislature to represent ratepayers in cases such as this where a utility seeks an increase in rates or change in services.

This hearing is being held by the New Jersey Board of Public Utilities (“Board” or “BPU”) to receive comments from members of the public concerning an Emergent Motion filed by New Jersey Natural Gas Company (“New Jersey Natural” or the “Company”) requesting the Board to allow the Company to increase its rate for Basic Gas Supply Service (“BGSS”) to cover the recent dramatic increases in wholesale natural gas prices across the country. This increase would depart from the BPU’s normal procedure for establishing BGSS rates. The normal procedure, which was established by the Board in an Order dated January 6, 2003, allows the Company and the other New Jersey gas utilities to petition by June 1 for an adjustment to their BGSS rates to reflect current natural gas prices in the fall of each year. The gas utilities are then permitted to apply for two self-implementing rate increases—of up to five percent respectively—on a 100 therm per month average residential bill, if needed, to cover increases in natural gas prices. The Company is permitted to implement such increases as of December 1 and February 1, upon 30 days notice to the Board and to the Ratepayer Advocate.

In accordance with the normal procedure, the Board, on August 19, 2005, issued an Order allowing the Company to increase its BGSS rate by 5.4 cents per therm, from 89.2 cents to 94.6 cents per therm. The impact of this increase on an average monthly bill for a typical residential heating customer using an average of 100 therms per month was an increase of about $5.40, or 4.2 percent, effective September 1, 2005.

On November 10, 2005, the Company filed an Emergent Motion requesting the Board to authorize the Company to implement a rate increase greater than the two five-percent increases permitted under the Board’s normal procedure. The Company’s motion requests the Board to allow the Company to increase its BGSS rate from the current 94.61cents per therm to $1.2597 per therm, an increase of 31.36 cents per therm, effective December 14, 2005. The requested rate change would increase a 100-therm residential bill by $31.26 per month, or approximately 23.2 percent. The Emergent Motion also requests the Board’s approval for the Company to apply for an additional self-implementing rate increase of 5 percent, if necessary.

The Emergent Motion states that the requested 23.2 percent rate increase is needed in order for the Company to recover dramatic increases in the cost of natural gas the Company purchases to serve its BGSS customers.
Although the Company recently implemented a gas price increase effective September 1, the pervasive damage to gas production and transport facilities caused by the natural disasters of Hurricanes Katrina and Rita only added to the existing volatility in the natural gas market. No one could have anticipated the extent of the damage to such a vital area of gas production and supply for our nation. Unfortunately, the Board had permitted the Company to increase its BGSS rate just prior to the hurricanes and the unexpected gas price increases. Therefore, the proposed BGSS increases reflect the effects of the hurricanes on gas supply, in addition to the steadily increasing demand for natural gas by consumers and gas-fired electric generation. Although there have been many recent news articles and reports that the price of gasoline has been in decline, the price of gasoline does not reflect the price of natural gas. Natural gas is traded as an independent commodity with its own distinct market.

The Company is not permitted to make a profit on its BGSS charges. BGSS rates are set to pass through to customers the cost of natural gas purchased by the Company. The Ratepayer Advocate is fully aware of the volatility in natural gas prices that is having a profound impact on all classes of ratepayers. However, this office will continue its comprehensive review prior to a final determination and order by the Administrative Law Judge and the Board of Public Utilities regarding the Company’s final BGSS rate.

Our office is conducting a complete investigation of the Company’s request based upon the information that is being supplied and updated by the Company. We have retained the services of an expert consultant to assist us in our review. The Ratepayer Advocate’s inquiry is focused on the critical issues of whether the Company’s proposal allows ratepayers to pay the lowest rates possible consistent with receiving safe, reliable and proper service. The New Jersey Board of Public Utilities, with legal submissions from the parties, including the Ratepayer Advocate, will make the final decision regarding the utility’s requests for an adjustment to its BGSS charge.

The purpose of this hearing is for you, the customer, to voice your opinion, relate your experiences and offer comments about your Company’s rates and service. It is important that you express your views so they may become part of the record on which the Administrative Law Judge and the Board of Public Utilities make their decisions. The Ratepayer Advocate also needs to hear your views. Your active participation is strongly encouraged to help in our evaluation of the Company’s proposals and our preparations for the evidentiary hearings.

This hearing is being transcribed and your comments will become part of the record. I would like to reiterate the importance of your participation so that the Ratepayer Advocate can have a clear record of your concerns and interests.
On behalf of the Ratepayer Advocate, thank you for attending tonight’s hearing.

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