Public Advocate Urges BPU to Reform State’s Electric Power Auction

Newark, N.J.— Public Advocate  Ronald K. Chen today, citing his concern over rising electricity costs, urged the Board of  Public Utilities (BPU) to act now to enhance its annual auction process that provides electric power to customers in New Jersey.

 “Over the past five years, electric generation prices consumers and small businesses pay have risen 97 percent overall, from over 5 cents to just under 10 cents per kilowatt,” Chen testified during a BPU hearing on the auction. “The current electric power auction needs to be reformed, and we urged the Board to make changes before the next auction in February, 2008.”

Chen gave his testimony at a public hearing called by the BPU to receive comments on its annual auction process. Since 2002, the BPU has held a Basic Generation Service Fixed Price (BGS-FP) auction in February for the procurement of electricity from power suppliers who set the electric rates that will be paid by the majority of New Jersey’s residential and small commercial consumers. Each year, pricing for one-third of the supply needed for the next three years is bid with the new price arising from the most recent auction.  Utilities that obtain power from the auction include companies such as: Public Service Electric and Gas (PSE&G), Jersey Central Power and Light Company (JCP&L), Rockland Electric Company and Atlantic City Electric Company. Their costs for buying electricity are passed on to consumers.

To improve the chances of getting better energy prices for consumers, a key recommendation Chen told the BPU is to augment the auction by using a portfolio manager approach. The portfolio manager approach would utilize an agent who would work on behalf of consumers and shop year-round for the best electricity deals. Chen said this approach would offer more flexibility in both the timing of purchases and on the contract term length for electricity resources. The approach would also result in more stability in prices for customers and the increased competitive pressure would give better results from the auction.

The comments can be viewed at the Public Advocate’s website at http://www.njpublicadvocate.gov or Rate Counsel’s website at  http://www.state.nj.us/rpa/

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The Division of Rate Counsel is a division within the Department of the Public Advocate and represents the interests of consumers of electric, natural gas, water/sewer and telecommunications and cable TV service. Additional information on this and other utility matters can be found at the Division’s website at http://www.state.nj.us/rpa/. The Department of the Public Advocate website is http://www.njpublicadvocate.gov.

Advocate Statement on BPU (BGS) Electric Power Auction, 9/20/07