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PSEG proposes $2.7B upgrade to gas distribution system; 5-year project to create 3,000 new jobs

New Jersey’s largest power and gas supplier, Public Service Electric and Gas Co., is looking to spend $2.7 billion over the next five years, or $540 million per year, to replace a quarter of its outdated cast iron pipe system.

The proposal is being made to the state’s Board of Public Utilities, which could approve it in the coming days. Roughly 3,000 full-time jobs would be created and stay in place every year for the duration of the program, the utility said in a written statement.

“New Jersey’s economic health is uniquely tied to the health of its infrastructure,” Raymond M. Pocino, vice president of the Laborers’ International Union of North America, said in the statement. “Because of this, the modernization of PSE&G’s aging gas infrastructure will be a long-term, positive investment that will increase the state’s job growth and yield both economic and environmental benefits for years to come.”

The project represents the second phase of PSEG’s natural gas infrastructure modernization program, and will replace 1,250 miles of leaky, cast iron gas pipes with modern plastic pipes. PSEG maintains 4,000 miles of cast iron pipes used to distribute natural gas, much of which was built before 1960. It is currently the largest such system in the U.S. The utility’s ultimate plan is to replace the entire system in 20 years.

PSE&G so far has replaced 286 miles of cast iron pipes since the beginning of 2016. PSE&G employees and contractors have performed the work safely. The project is being executed for safety reasons — the pipes make up about a quarter of the utility’s distribution network, yet account for 65 percent of gas leaks, according to the announcement. The five-year program would reduce greenhouse gas emissions equal to taking 43,000 vehicles off the road.

The project is being funded by the drop in supply cost of natural gas over the past several years, a PSEG spokesperson told NJBIZ. While customers did see a slight increase in natural gas costs, the price of natural gas is still down by nearly 50 percent since 2009.

“It is this drop in supply cost that give us an opportunity to invest in upgrading the infrastructure to improve  reliability and environmental impact — with bills still being well below historical levels,” the spokesperson said in an e-mail.

“Through the success of our current modernization program, we’ve demonstrated we can manage a larger-scale, longer-duration program safely and cost-effectively,” Ralph LaRossa, PSEG’s outgoing president, said in the announcement.

“Today’s proposal would give us the ability to replace more aging gas pipes at an accelerated pace, ensuring we can continue to provide customers with safe, reliable natural gas service now, and for many years to come. The filing is also in line with the BPU’s proposed rules on supporting longer-term infrastructure programs.”

“The impact this plan will have on state and local economies is tremendous. The infusion of hundreds of long-term, salaried positions is welcomed and an opportunity to put many residents back to work,” state Assemblyman Timothy Eustace said in a written statement. “I applaud PSEG for being proactive and exhibiting an understanding of accountability by taking the reins and developing a plan that not only focuses on health and safety issues but will be good for the environment as well.”

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