In July of this year, JCP&L filed a petition for a 4-year, $387 million investments to the local distribution system. Many JCP&L customers know that CHARGE have been advocating for JCP&L to fix and properly maintain the local distribution system, the source of 99% of power outages.
Despite this, at yesterday’s New Jersey Board of Public Utilities (“BPU”) public hearing in Freehold, CHARGE core group leaders Kin Gee and Rachael Kanapka spoke out and expressed concerns about the proposed plan. See below for full text of public comments.
In effect, customers have ALREADY paid for these much-needed fixes. However, as evidenced by their actions in the past 10+ years, it appears the money benefited JCP&L’s shareholders and management (through bonuses), at the expense of customers.
The proposed investments are the improvements we want JCP&L to make. However, it should be done and included as part of a normal base rate filing that is subject to review that the rates “just” and reasonable”.
***** Full text of Kin Gee’s public comments *****
PUBLIC COMMENTS FOR JCP&L RELIABILITY PLUS PETITION
Docket No. EO18070728
Presented at BPU Public Hearing on November 13, 2018 in Freehold, NJ
Good afternoon, my name is Kin Gee. I am a resident of Holmdel Township in Monmouth County. I am also President of the citizens group called CHARGE – Consumers Helping Affect Regulation of Gas & Electric. CHARGE is a non-partisan, non-profit advocacy group that seeks to be the public voice of New Jersey’s individual energy consumers.
I am here today to voice our objection to the JCP&L’s Reliability Plus petition.
Our first concern is that while some of the projects may qualify as possible electric distribution automation investments under the rules of the Infrastructure Investment Program, a significant portion of the proposed investments appears to be normal, routine maintenance and basic upkeep of the distribution system that should be performed by JCP&L when it was granted a franchise as a public utility.
As an example, out of the total $387 million proposed investments, $108 million is for vegetation management or tree trimming, $20 million for lateral fuse replacement, and, interestingly, $9 million for new fences around substations. We believe that these investments should be part of a base rate filing that includes a review that the rates are just and reasonable.
Our second concern is that even when allocated extra money to address reliability issues in a base rate filing by the BPU, JCP&L has not demonstrated that it will actually spend the money for the intended purposes. We are concerned that, effectively, ratepayers are being asked to pay twice for basic and routine work: first, under a rate filing as part of this petition and then a second time through under-spending of normal operation and maintenance expenses that results in “over-earning” by JCP&L.
Let me explain this concern. In 2005, JCP&L was awarded additional funds by the BPU as part of the base rate case in and then did not submit a base rate filing for the next 7 years until 2012 when it was ordered to do so by the BPU after the New Jersey Division of Rate Counsel petitioned to do so.
That 2012 base rate case was finally settled in March 2015. This meant 10 years had elapsed from the time when JCP&L was awarded additional funds to address reliability issues to the time when the BPU agreed that JCP&L has over-earned and ordered a base rate reduction of $115 million. It also meant 5 years had elapsed from the time when Rate Counsel first filed a petition suggesting that JCP&L has over-earned. That means, on a cumulative basis, JCP&L had “over earned” by $575 million (5 years times $115 million) that inured to the benefit of JCP&L’s shareholders and management, all at the expense of ratepayers.
Incredibly, after not filing a base rate case for about 7 years until it was ordered to do so, JCP&L came back just one year later and requested a rate increase of $142 million. This base rate case was settled in December 2016 and JCP&L was awarded an increase of $80 million as part of a stipulated settlement.
Following that approval, JCP&L issued a press release saying: “Overall, the increase will total $80 million and be used to continue tree trimming, inspections of lines, poles and substations, and maintenance for newly installed equipment that enhances and modernizes the electric system.” Notwithstanding this press release and according to the Form 1 filed, within a short 12 months, JCP&L was able to reduce its Operation and Maintenance Expense by $96 million for the year 2017.
To quote Yogi Berra, it appears to be déjà vu all over again.
Our third concern is that the petition is financially driven in the interest of the company and at the expense of ratepayers.
JCP&L is seeking approval for semi-annual rate filings for the investments after they are placed into service. However, not only will this be done outside of the normal base rate filing process, but JCP&L could be allowed an extra 50 basis points over and above the allowed ROE from the last base rate case. Keep in mind that a significant portion of the proposed investments is what we would consider as normal and routine work.
Finally, our fourth concern is that, according to the IIP rules and as indicated in the petition, JCP&L will not be required to file a base rate case until January 2024.
This means that a full seven years may elapse from the time that the last base rate case was settled. The last time this happened, JCP&L was found to have over-earned by $575 million on a cumulative basis.
Related to this point is the fact that some of these investments will have the benefit of reducing operational costs for JCP&L. An example is the $20 million proposed investment for the replacement of lateral fuses with reclosers. JCP&L has publicly stated that the breakeven for the reclosers is just two field trips by utility workers. In other words, JCP&L will recoup the cost of a recloser with just two saved field trip by its workers. While customers will benefit from these reclosers, JCP&L will also benefit financially in a significant and quick fashion. However, if JCP&L is not required to file a base rate case until 2024, the expense savings from reclosers as well as the other decreases in operational cost that should benefit ratepayers in a rate adjustment will be delayed.
As the BPU knows very well, utilities, for the most part, are for-profit companies. In particular, as seen through the actions for past 10+ years, JCP&L has demonstrated that it does not have its customers and public interest at heart.
JCP&L has also demonstrated that when it wants to, it can file for a rate increase very quickly. We believe that the proposed investments, for the large part, should be part of a normal base rate case and subject to a review that the rates are just and reasonable.
For all the concerns stated above, we urge the Board to deny JCP&L’s Reliability Plus petition.