BPU says residential ratepayers should see drop in energy prices

February 09. 2012 1:21PM

BPU says residential ratepayers should see drop in energy prices

Residential and small commercial ratepayers should see a drop in their electric bills come June 1.

The Board of Public Utilities today approved the results of its annual base generation service auction, which began last week. Depending on their utility, ratepayers should see a rate decrease of between 1 percent and 6.4 percent for the 12 months beginning in June. JCP&L customers are expected to see the largest decrease; Rockland Electric customers should see about a 1 percent drop in their monthly bills.

"Our analysis of this is basically that we are benefiting from the drop in natural gas prices," BPU President Robert M. Hanna said during a conference call with reporters. "That is a very welcome trend for our New Jersey ratepayers."

The process actually involves two auctions — a fixed-price auction for residential and small commercial customers, and a commercial and industrial auction for larger energy consumers.

The energy procured in the fixed-price auction will supply one-third of the power used by residential and small commercial customers in the coming year. The other two-thirds were procured in 2011 and 2010, meaning that the price ratepayers ultimately pay next year will be based on the prices from the 2010-12 auctions.

The commercial and industrial auction uses a one-year system. Those prices went up an average of 7.2 percent over last year, though because that auction price makes up only a small part of industrial ratepayers' bills, falling energy prices still could result in lower overall bills for large energy consumers.

Most industrial customers won't be affected by the auction, as nearly 80 percent of those consumers get their energy via separate contracts with nonutility third-party energy providers.

Hanna blamed the commercial and industrial price increase in part on the reliability pricing model, a construct used by the regional grid operator, PJM Interconnection, to auction electricity generation capacity in the region.

"New Jersey suffers from some of the highest electricity prices in the nation," he said. "The way the market is supposed to be designed (is) that those high prices would send a signal for new generators to come in. That has not happened, and we believe it's because of those barriers to entry."

Hanna said another problem is that utilities hold too much sway over the interconnection fees paid by new generators to connect to the grid. He said the BPU is trying to change that, too.