Industrial ConsumersPower

PSE&G executes agreement to lower transmission rates


New Jersey’s oldest and largest gas and electric delivery public utility PSE&G executed an agreement today with the New Jersey Board of Public Utilities and New Jersey Division of Rate Counsel. Accordingly, this agreement would lower transmission rates; thus, saving the typical electric residential customer about 3% on their bill, or approximately $3 per month.

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Also, if approved by the Federal Energy Regulatory Commission, the agreement would reset the base return on equity for PSE&G’s transmission formula rate at 9.9%; in fact, reduced from 11.18%. Furthermore, and more importantly, combined with other elements of the settlement, the utility’s transmission revenues would lower by approximately $140 million per year.

Lowering transmission rates – PSE&G

Indeed, since 2007, PSE&G has built more than 500 miles of high-voltage transmission circuits. It also cured more than 200 reliability violations identified by PJM. Consequently, these upgrades replaced transmission lines built long before most homes and offices were air-conditioned.

Therefore, these investments significantly improved network reliability; and consequently, led to an 80% reduction in transmission outages supporting today’s lifestyles. 

Additionally, even before factoring in the rate reduction contained in the recent agreement, PSE&G’s residential rates are still approximately 30% lower than a decade ago; and also 40% lower when adjusted for inflation.

Worth noting, PSE&G will seek FERC approval of the agreement and request that the rate reduction is effective on Aug. 1. If FERC approves the deal, customers would then receive the full benefit associated with this change back to Aug. 1.

About the agreement

Some of the benefits for customers and critical terms and impacts of the agreement include; for instance, a reset of PSE&G’s base transmission ROE to 9.9% from 11.18%; accordingly, this would lower its annual transmission revenue requirement by about $100 million per year (pre-tax).

Also, lower annual depreciation expenses of approximately $42 million with a corresponding reduction in revenue requirement. Similarly, improved cost recovery methodologies regarding materials and supplies; an increase in PSE&G’s equity ratio from 54% to 55% of total capitalization; and lastly, no impact on existing incentives, the ability for PSE&G to seek new incentives, or the ability for BPU and/or Rate Counsel to oppose such a request.

Importantly, PSE&G expects the financial impact of this settlement agreement to lower its net income by approximately $50 million to $60 million.

In this sense, PSE&G President and Chief Operating Officer Kim Hanemann said in a media release; In fact, “this settlement, under which PSE&G has voluntarily agreed to reduce its electric rates; is a balanced resolution; that will deliver timely rate savings to customers.”

Besides, “PSE&G’s transmission investments have saved customers hundreds of millions of dollars in congestion costs. Also, it increased the reliability and resiliency of the grid. Finally, they will support greater development of renewable resources to help New Jersey meet its clean energy goals.”

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