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PSE&G, state regulators settle on $1.2 billion 'Energy Strong' grid-hardening project

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“We look forward to the board's final approval so that we can get to work,” Ralph Izzo, Public Service Enterprise Group chairman and CEO, said in a prepared statement.
“We look forward to the board's final approval so that we can get to work,” Ralph Izzo, Public Service Enterprise Group chairman and CEO, said in a prepared statement. - (AARON HOUSTON / NJBIZ)

A deal with state regulators will allow Public Service Electric and Gas to move ahead with its high-profile Energy Strong program—first proposed with a $3.9 billion price tag—to harden its utility infrastructure in the wake of Hurricane Sandy.

But it will do so with a more modest plan—and at less than a third of the cost.

Under a settlement announced Thursday, PSE&G unveiled a revised Energy Strong plan costing $1.22 billion, more than half of which would be used to upgrade 29 substations that were flooded during Sandy and Hurricane Irene. The Newark-based utility, the state’s largest, said an agreement had been signed by the staff of the Board of Public Utilities and is now being reviewed by the other participants in the case before it’s submitted for approval.

The news comes more than a year after PSE&G outlined its original 10-year Energy Strong plan, with a nearly $4 billion cost that raised alarm among consumer advocates. It also set the stage for a lengthy review process that included public hearings and negotiations because the cost would be borne by ratepayers, although PSE&G said they would be offset expiring surcharges.

The revised three-year plan outlined Thursday would create more than 2,000 jobs, officials said, about one-third of the amount called for by the original proposal.

“We’re pleased that we can move ahead and start building the resiliency into our systems needed to withstand the kind of severe weather that has devastated our state in recent years,” Ralph Izzo, Public Service Enterprise Group chairman and CEO, said in a prepared statement. “Clearly we are not able to make every improvement we planned, but this settlement will allow us to begin to make meaningful upgrades.”

They include upgrading substations, replacing 250 miles of cast iron gas pipes and adding intelligence to PSE&G systems to help speed restoration when there are outages, the utility said in a news release. The proposal makes these allocations:

  • $620 million to raise, relocate or protect 29 switching and substations that were damaged by water in recent storms
  • $350 million to replace and modernize 250 miles of low-pressure cast iron gas mains in or near flood areas
  • $100 million to create redundancy in the system, reducing outages when damage occurs
  • $100 million to deploy smart grid technologies to better monitor system operations to increase our ability to more swiftly deploy repair teams
  • $50 million to protect five natural gas metering stations and a liquefied natural gas station affected by Sandy or located in flood zones

“And as we make these improvements, we will work together to consider additional efforts to further harden our system,” said Izzo, who acknowledged “the efforts of all parties for their thoughtful review in reaching this agreement.” He also thanked the “thousands of government officials, business and labor leaders and members of the public” who have supported PSE&G’s proposal over the past 14 months.

“We look forward to the board’s final approval so that we can get to work,” Izzo said.

Under the agreement, PSE&G ratepayers would ultimately cover the first $1 billion in project costs. The impact on the typical residential combined electric and gas bill is expected to be about 2 percent in 2018, which the utility said will be more than offset by expiring charges in the same timeframe.

Evelyn Liebman, associate state director of advocacy for AARP New Jersey, told NJ.com the settlement takes the plan “from a virtual blank check to a relatively tight work order.” The organization said it supports the settlement because “the work is focused on infrastructure we know is vulnerable based on experience during Sandy and Irene, at a cost that is now based on actual engineering studies, with strong consumer protections.”

Under its initial proposal, PSE&G sought approval to invest $2.6 million, with the ability to seek approval to spend another $1.3 billion in the ensuing five years.

As it sought to build support for the unprecedented cost of Energy Strong, PSE&G pointed to a Rutgers University study that put the total economic cost of Hurricane Sandy at $25 billion. The storm knocked out power to 90 percent of PSE&G's 2.2 million customers.

The Rutgers study totaled utility damage at $1.7 billion, and the cost to businesses at $6.2 billion, though the latter came from a variety of factors, not just outages.

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Joshua Burd

Joshua Burd

Josh Burd covers real estate, economic development and sports and entertainment. Before joining NJBIZ in 2011, he spent four years as a metro reporter in Central Jersey. His email is joshb@njbiz.com and he is @JoshBurdNJ on Twitter.

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