Remarks of Stefanie A. Brand,
Director of the N.J. Division of Rate Counsel
Regarding the New Jersey Greenhouse Gas Initiative Act/Assembly Bill
4559(Mckeon/Chivukula)
Presented at the Assembly Environment and Solid
Waste Committee Meeting
December 6, 2007

Good afternoon.  I would like to thank Assemblymen McKeon and Chivukula for posting this legislation.  I am Stefanie Brand, director of the New Jersey Division of Rate Counsel.  I would like to thank the entire committee for the opportunity to speak with you today regarding Assembly Bill 4559 and the Regional Greenhouse Gas Initiative.

I am here today to express Rate Counsel’s support for A4559 and the Regional Greenhouse Gas Initiative of which it is an integral part.  As you may be aware, Rate Counsel has been a longtime and fervent supporter of the Regional Greenhouse Gas Initiative and strongly supports energy efficiency and renewable energy initiatives.  As we await the Governor’s Energy Master Plan, which aims not only to reduce greenhouse gases and encourage conservation, but also to ensure a stable energy supply and reduced energy costs, we would strongly support legislation that is consistent with those goals.

Unfortunately, the Committee substitute contains provisions that undermine those goals and may well be inconsistent with the Energy Master Plan.  Certain provisions, most notably those in Section 13, which allow utilities to seek rate increases for their programs, including compensation for foregone revenues, threaten to stifle competition in the renewable and energy efficiency industries, and allow extraordinary windfalls for electric and gas utilities and generators, funded entirely by ratepayers. These provisions will lead to higher energy prices, higher utility profits and disincentives for consumers to conserve. 

Specifically, this bill will:

• Allow utilities to not only recover the costs of their energy efficiency and conservation programs, but allow them, with Board approval, to continue to charge for any energy savings that result.  Thus, the more successful the programs, the more ratepayers will pay to compensate the utilities for their foregone costs and revenues.  Rate Counsel believes strongly that if consumers conserve, they should reap all of the benefits, and not be required to split it with the utilities and generators that are already making record profits.  By shifting the benefit, this bill will not provide real relief to ratepayers from burgeoning energy costs and may well discourage consumers from taking advantage of efficiency and conservation programs.
•  Section 13 will allow the utilities to recover their costs and lost revenues automatically if proceedings to review the reasonableness of their requests for rate increases are not concluded within a specified period of time.  This provision flies in the face of well-established law that requires that the public be afforded due process before their rates are increased. There is absolutely no justification for dispensing with the public’s constitutional protections by allowing unprecedented “automatic” rate increases.
• The bill allows utilities to engage in competitive services without Board approval, effectively repealing the provisions of the Electric Discount and Energy Competition Act that attempted to preserve the ability of other companies to enter into competitive businesses such as energy efficiency and conservation.  Companies seeking to enter into these businesses will not be able to compete with the utilities, particularly if the utilities are able to recover lost revenues through automatic rate increases.  The Act should encourage competition, not eliminate it.
• The bill effectively eliminates the goal of providing 100% consumer benefit from the sale of allowances.  Prior versions of this Bill acknowledged that the ratepayers who fund these programs should reap their benefits.  This version of the Bill describes providing “up to” 100% to consumer benefit, and even retains the definition of that term, but does not in any significant way dedicate the proceeds to benefit the residential ratepayers.  Section 8(b) of the Bill at best devotes 20% of the funds to benefit residential consumers.  This is substantially below what any other State has devoted to residential ratepayers.  Section 8(d) of the Bill provides that any amount accumulated in the fund over $70 million should be used to mitigate impacts on ratepayers, but gives that money to the compliance entities, i.e., the electricity generators, to achieve that purpose as they see fit.  The Legislature should confirm its commitment to use these funds, which are ultimately paid by the ratepayers, in a way that will lower energy costs. 
• The bill dispenses with a variety of due process protections that will ensure that these funds are used appropriately.  The Bill provides that any changes to state rules and regulations required by the State’s participation in the regional initiative need not be promulgated pursuant to the Administrative Procedure Act. The Bill only generally outlines the criteria for the agencies to distribute these funds, and includes purposes that are unrelated to the generation of these funds. For example, while a reduction in vehicle miles traveled and stewardship of forests are unquestionably laudable goals, are they goals that should be funded through our utility bills? With higher energy costs choking many consumers, Rate Counsel submits that this policy choice should only be made after the public has had a full opportunity to participate in the rulemaking process.
• Finally, the Bill also, notwithstanding any other law, rule or regulation to the contrary, ratifies any action taken in the past or future to participate in activities that further the purposes of the Bill and any “for-profit or non-profit” corporation or association created to further the Bill’s purpose.  This is contrary to law and is wholly inadequate to protect the public’s interest in ensuring that these funds are used for proper purposes and with sufficient accountability. 

Rate Counsel strongly urges that this Committee carefully review these provisions, and the Bill as a whole to ensure that it meets the need to reduce greenhouse gases without overburdening the already overburdened utility ratepayers.  There is simply no reason to pay the utilities and generators from every pocket in order to achieve the laudable goals of reducing greenhouse gas emissions and encouraging energy conservation.  These measures are not needed to encourage the utilities to create programs, as evidenced by the fact that the State’s largest utility has already proposed a solar program that would pay for itself and provide a return for the company without automatic rate increases.  If we seek to encourage the utilities to participate in this industry, however, it must be done in a way that allows for a level playing field, so that smaller companies can compete.  This means they should not be allowed to recover their costs or revenues in their rate base, but should be required to earn their money on the same terms as their competitors.

Rate Counsel submits that consumers will be more likely to conserve and support these initiatives if they will see a real benefit from efficiency and conservation.  High energy prices are already choking the economy of this state. This Bill should look to ease that burden, not add to it.

I would be happy to meet with you to discuss these issues further and work together to create a Bill that will help New Jersey meet its environmental and energy efficiency goals in a fair and economically beneficial manner.

Thank you for allowing me the chance to give this testimony on behalf of New Jersey’s ratepayers.

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