PSE&G Reaches Agreement to Lower Transmission Rates; Will File Agreement With FERC; Electric Customers to Save Approximately $140 Million a Year
Agreement with New Jersey BPU & Rate Counsel Resets Utility’s Transmission ROE to 9.9%
(NEWARK, N.J. – July 14, 2021) PSE&G executed an agreement today with the New Jersey Board of Public Utilities and New Jersey Division of Rate Counsel related to its transmission rates that would save the typical electric residential customer about 3% on their bill, or approximately $3 per month. 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%, reduced from 11.18%. Combined with other elements of the settlement, PSE&G’s transmission revenues would be lowered by approximately $140 million per year.
“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,” PSE&G President and Chief Operating Officer Kim Hanemann said. “PSE&G’s transmission investments also have saved customers hundreds of millions of dollars in congestion costs, increased the reliability and resiliency of the grid and will support greater development of renewable resources to help New Jersey meet its clean energy goals.”
Since 2007, PSE&G has built more than 500 miles of high-voltage transmission circuits, curing more than 200 reliability violations identified by PJM. These upgrades replaced transmission lines built long before most homes and offices were air-conditioned and businesses relied on around-the-clock energy supplies. These investments have significantly improved network reliability and led to an 80% reduction in transmission outages — supporting today’s always-on lifestyles.
With all of these important investments in the system and before factoring in the rate reduction contained in this settlement, PSE&G’s residential rates are still approximately 30% lower than a decade ago and 40% lower when adjusted for inflation.
PSE&G will seek FERC approval of the agreement and request that the rate reduction be effective on Aug. 1. FERC action is expected to take place later this year. If the agreement is approved, customers would then receive the full benefit associated with this change back to Aug. 1.
If approved by FERC, the agreement will provide benefits for customers and regulatory certainty for all parties. Key terms and impacts of the agreement include:
- Reset of PSE&G’s base transmission ROE to 9.9% from 11.18%, which will lower its annual transmission revenue requirement by about $100 million per year (pre-tax);
- Lower annual depreciation expenses of approximately $42 million with a corresponding reduction in revenue requirement (resulting in no net impact on earnings);
- Improved cost recovery methodologies regarding materials and supplies, as well as administrative and general costs;
- An increase in PSE&G’s equity ratio from 54% to 55% of total capitalization;
- Settling parties cannot challenge the formula rate for three years from the effective date; and
- 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.
The financial impact of this settlement agreement is expected to lower PSE&G’s net income by approximately $50 million to $60 million, or $0.10 per share to $0.12 per share, on an annual basis in the first 12 months, once implemented.
Public Service Electric & Gas Co. (PSE&G) is New Jersey’s oldest and largest gas and electric delivery public utility, serving three-quarters of the state’s population. PSE&G is the winner of the ReliabilityOne Award for superior electric system reliability in the Mid-Atlantic region. In 2020, PSE&G was named the most trusted combined gas & electric utility in the East Region, by the Cogent Syndicated Brand Trust Index. PSE&G is a subsidiary of Public Service Enterprise Group Inc. (PSEG) (NYSE:PEG), a diversified energy company. PSEG has been named to the Dow Jones Sustainability Index for North America for 13 consecutive years (www.pseg.com).
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