REMARKS OF BLOSSOM A

REMARKS OF BLOSSOM A. PERETZ, ESQ.
DIRECTOR, DIVISION OF THE RATEPAYER ADVOCATE
PRESENTED BY JUDITH B. APPEL, ESQ.
ASSISTANT DEPUTY RATEPAYER ADVOCATE, DIVISION OF THE
RATEPAYER ADVOCATE

In The Matter of New Jersey Natural Gas Company's Amended Proposal to Review its Levelized Gas Adjustment Clause, Including its Gas Cost Recovery Factor, its Demand Side Management Adjustment Clause Factor and Weather Normalization Clause Factor, with an Increase to its Gas Recovery Factor and its Remediation Adjustment Factor, a Decrease to its Transportation Education and Implementation Rate and a Decrease to its Prior Gas Cost Adjustment Factor

PUBLIC HEARING
Freehold, New Jersey
August 22, 2000

My name is Judith Appel. I am an attorney representing the New Jersey Division of the Ratepayer Advocate. The Division of the Ratepayer Advocate represents the interests of all utility customers, including residential, small business, commercial and industrial ratepayers. The Division is also a party in every case where New Jersey utilities seek changes in their rates or services. The Ratepayer Advocate gives customers a voice in setting long-range energy, water and telecommunications policy that will affect utility services well into the next century.

Company Filing

New Jersey Natural Gas Company ("NJNG" or the "Company") provides natural gas utility services to approximately 400,000 customers located in Monmouth, Ocean, and parts of Burlington, Morris and Sussex Counties. The Company recently filed an amendment to its pending petition before the Board of Public Utilities ("BPU" or the "Board") to increase the Gas Cost Factor ("GCA") and Remediation Adjustment Factor ("RA") in its Levelized Gas Adjustment Clause ("LGAC"), to decrease its Transportation Education and Implementation Rate ("TEI"), and to decrease its Prior Gas Cost Adjustment Factor ("PGCA"). The Company had originally sought a small decrease in the LGAC, which is designed to permit the Company to pass through to its customers the actual costs of natural gas which the Company incurs. Because of recent increases in the cost of gas, the Company is now seeking to recover projected gas costs of approximately $176 million. On a per-therm basis, this amounts to an increase of $0.1330 cents per therm. The average bill for a residential sales customer using 1,100 therms of gas annually would increase from $918 to $1,065, an increase of 16%. The average bill for a residential transportation customer, one who buys gas from a supplier other than NJNG, using 1,100 therms of gas annually would decrease from $477 to $471, a decrease of 1%.

The Company also proposes the following adjustments, which are included in the increased LGAC rate:

An increase of $0.0059 per therm in its Remediation Adjustment Clause ("RA"), which was the subject of a separate petition. The purpose of the RA is to recover the costs of environmental remediation of contaminated former coal gas manufacturing sites for which the Company is responsible.
No change to its Weather Normalization Clause Factor ("WNC"), which will remain at $0.0184 per therm. The purpose of the WNC is to adjust the Company's revenues in years where temperatures are extremely warm or extremely cold.
The rate for Transportation Education and Implementation costs will be set at $0.0000 per therm. TEI costs are designed to permit the Company to recover costs attributable to customer education and incremental program costs.
A decrease of $0.0188 per therm for the Prior Gas Cost Adjustment Clause. The PGCA relates to Board-approved recovery of gas costs not previously recovered in rates; and
No change in the Demand Side Management Adjustment Clause ("DSM"), which will remain at $0.0035. The DSM charge permits the Company to recover the costs of energy conservation and efficiency programs.

High Gas Cost Prices

At the present time, the Ratepayer Advocate does not have complete information and details regarding the projected increases, rates and costs included in the Company's filing. However, it is common knowledge that gas costs have risen to unforeseen levels in 2000. Newspapers such as the Wall Street Journal and the New York Times, as well as the Star-Ledger and the Asbury Park Press, have warned of significant gas price increases in the wholesale marketplace. As a result of the rise in gas costs, the Ratepayer Advocate recently convened a meeting of senior executive and gas purchasing officers from all four natural gas utilities in New Jersey and Board of Public Utilities Staff in order to address the problem of potential large increases in customers' gas bills. The Ratepayer Advocate is working with all of these parties to keep any rate increases as low as possible.

The increase in natural gas prices is caused by a number of factors, the most important of which are:

Drop in production of natural gas.

U.S. production of natural gas was reduced sharply after prices dropped in 1988. Because prices were low, those companies which produce natural gas did not look for new sources of the commodity. Now, there is insufficient natural gas to meet demand. The producers have begun to drill for new supplies of natural gas; however, there will be a lag of 12 to 18 months before the new wells begin to produce.

Increased Demand for Natural Gas

Demand for natural gas is rising. The Clean Air Act Amendments are causing electric generators to use nuclear fuel and natural gas instead of coal. Additionally, hot weather across most of the country, particularly in the West and Southwest, has resulted in increased use of gas-fueled electric generation. Much of the electric-power demand growth this year will be met with natural gas. Some new gas-fired generation units are being added, but most of the increase comes from higher operating levels of gas-fired electric generating plants.

Possible weather-related increases

Hurricanes and other serious weather conditions and natural disasters adversely affect the price of natural gas. If serious weather conditions occur later this summer or fall, natural gas prices will rise further.

We do not wish to alarm you unnecessarily. There is a sufficient supply of natural gas to heat our homes this winter. Unfortunately, the cost of heating our homes may be higher.

Ratepayer Advocate Review

Regarding NJNG's proposed rate increase, the Ratepayer Advocate is currently reviewing data provided by the Company as well as information on the subject of gas cost increases from industry publications and the commodity markets. We will work with the Company, Board Staff and other intervenors to keep any rate increase as low as possible.

In our investigation of this matter, the Ratepayer Advocate is focusing on the following issues:

The reasonableness of the Company's proposed rate increase; and
The reasonableness of the Company's gas purchasing policies.

Pursuant to our statutory mandate, the Ratepayer Advocate not only litigates matters such as this in hearings, but also negotiates and settles them when appropriate. Whether the Ratepayer Advocate litigates or settles a case through stipulation, the ratepayers' best interests are our primary concern. If evidentiary hearings are necessary, we will cross-examine the Company's witnesses and submit evidence. However, the ultimate decision regarding this and all other utility matters in New Jersey is made by the Board of Public Utilities.

The purpose of this public hearing is for you, the customer, to voice your opinion, relate your experiences and offer comments about the company's filing. This hearing is being transcribed, and your comments will become part of the official record in this case. The judge will instruct you to give your name and address before you speak. It is important that you express your views, as they become part of the record on which the Board of Public Utilities will make its decision. The Ratepayer Advocate also wants to hear your views. We strongly encourage your participation, which will help us evaluate the Company's proposal.

We know that you may have concerns about the proposed changes in your utility rates. I am available tonight, on behalf of the Ratepayer Advocate, to discuss your concerns, as are representatives of the Board's Staff. We will be available to meet with you and answer questions at the conclusion of tonight's public hearing.

On behalf of the Ratepayer Advocate, I would like to thank you for attending this evening.

HOME