Good morning, Commissioner Butler. I appreciate this opportunity to comment on the New Jersey natural gas utility companies’ proposed provisional rate and flexible pricing mechanisms.

This time a year ago, I don’t think anyone would have guessed that we would be sitting here conducting these hearings right now. No one foresaw that the natural gas marketplace would become as volatile as it has. No one thought that this winter heating season, which is a difficult time for many consumers in warm years with low gas prices, would devastate the household economies of many New Jerseyans. No one could have guessed that in a year that included proceedings on such high-profile consumer matters such as Verizon’s rate hike, establishment of a Universal Service Fund, and Comprehensive Resource Analysis that natural gas would emerge as the most important issue to New Jersey consumers.

On the day the Board first approved the provisional rate increases, a record was set in my office. We received more press  calls and interview requests that day than in any other day in our history. Twenty-five print and radio outlets and four television stations interviewed me that day and several others did so in the days afterward. The media immediately recognized this as the biggest utility-related "pocketbook" story of the year.

My office has received more inquiries about the natural gas increase than any other single matter before the Board in recent memory. The specter of paying hundreds of dollars more this year for essential natural gas service has many New Jerseyans -- especially those on low or fixed incomes -- rightly concerned. Consumers ask me how to cope with what will be, at a minimum, a 20 percent rate hike. Before they even receive their bills, they know that they are going to feel the pinch. I expect these requests for information and assistance to increase substantially once the full amounts of these increases are realized.

I tell consumers about the options available to them, including payment plans, efficiency strategies they can employ, and the availability of state and federal financial assistance programs. Even with these mitigation measures, however, natural gas consumers will long feel the effects of these rate hikes.

Many of the people who have contacted my office have asked, "How did this happen? Why are the gas companies asking to raise rates up to 40 percent? What went wrong?"

We believe the answer to these questions is a two-parter. The first, and most obvious, part of the response is that the wholesale price has gone up dramatically in the past year due to increased demand, lower supply, and the changing needs of large-scale natural gas consumers. The second half of the response is that the gas companies, as a group, failed to adequately protect their customers from the effects of market volatility.

Now I will pose a question, Commissioner Butler: Given the utilities’ partial responsibility in this matter, should consumers be the only ones to feel the impacts of the volatile wholesale natural gas marketplace? Frankly, I find it inconceivable that three of the four natural gas companies failed to take appreciable steps to insulate their customers from the volatility of the market. Instead of accepting responsibility, these companies want to pass along the result of their poor judgement and lack of responsiveness to changing market conditions on to their customers. I think that is wrong.

Consider that the fundamental nature of a public utility, especially an incumbent monopoly utility company, is to provide the most reliable service at the most reasonable price possible. In this way the utility establishes a compact with its customers. In exchange for providing reliable service at a reasonable price, the company and its shareholders reap reasonable financial benefits. When the utility keeps up its end of the bargain, it should benefit. When it fails to meet its obligation to customers, however, the company should not receive the same benefit as if it had done its job properly. To the extent that the company fails its ratepayers, it should be held accountable.

That is why I firmly believe that the natural gas companies need to share the burden imposed by the wholesale marketplace with their ratepayers. I also believe that they should be made to share the burden to the extent that they failed their customers. Those that did not take any steps to mitigate or that took very limited steps must share a significant portion of the burden. The senior citizen who lives from check to check should not have to pay extra every month to cover the essentially irresponsible behavior of her natural gas company’s executives. That is why I am advocating measures like disallowance of a portion of the utilities’ gas costs and disallowance of interest on under recoveries. For the company that actually took steps to protect their customers, I am suggesting that they share a much, much smaller part of the burden.

The natural gas companies spend a lot of time and money promoting themselves as good corporate citizens. Granted, they do participate in and support a number of very worthy projects and organizations. These good corporate citizens need to take responsibility for their action, or inaction as the case may be. To do any less is a disservice to the rate paying public of the State of New Jersey.

You will recall that the Board Order permitting the provisional rate increases included significant educational mandates. Some of these, like distributing bill inserts about the price increases and assistance programs, have already been done. However, we are well into the winter heating season -- during one of the coldest winters in a number of years -- and we still haven’t seen other tangible components of the education initiative. Conspicuously absent is the mass-media campaign. The New York Public Service Commission announced its mass-media education initiative in late September last year -- around the same time that New Jersey’s natural gas companies filed for emergent rate relief -- and began rolling out ads not long thereafter. Commissioner Butler, have you been aware of a comprehensive statewide mass-media education program in New Jersey? I urge you and President Tate to immediately investigate the delay in the development and implementation of this initiative before it is springtime and too late to do consumers any good.

While we will spend a good deal of time during this proceeding discussing past actions and responses to changes in the wholesale natural gas marketplace, it is important to consider the future and how the gas companies can and should respond to similar crisis situations. We need to protect consumers by making sure that a situation like this cannot happen again. Part of the solution will be working with the natural gas companies in devising prudent commodity procurement and management strategies.

Another issue, while not within the direct scope of this proceeding, concerns implementation of certain programs called for in the Electric Discount and Energy Competition Act of 1999. The Board needs to act and act now to establish at least the following programs included in EDECA: a Universal Service Fund and renewable energy and energy efficiency programs.

You will recall that EDECA sets forth as public policy goals the lowering of energy costs, the provision of more and better choices to energy users, and placement of greater reliance on competitive markets in delivering energy services, all while maintaining regulatory oversight to provide appropriate consumer protections in the marketplace. There is no reason to further delay implementation of these goals.

Thank you.

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