The Star-Ledger

Man Sues PSE&G Over Surcharge

He says the utility charges for plants that are thriving

The Star-Ledger — Sunday, May 20, 2007

Star-Ledger Staff

Just about everyone complains about soaring electric and gas bills, but Richard Murphy decided to do something about it.

The Bergen County man filed a lawsuit last month against Public Service Electric & Gas, the state's largest utility, seeking to overturn a key provision of a 1999 law that broke up the state's electric monopolies.

In deregulating the industry, the state allowed PSE&G to add a monthly surcharge to customers' bills – money the utility said it would need to pay off $2.9billion in debt, incurred while building 16 power plants.

The civil complaint, filed in state Superior Court in Hacken sack, is the latest legal twist in the ongoing debate about energy deregulation, which proponents said would lower electric bills. Instead, utility bills in New Jersey spiked after a cap on rates was lifted in 2003.

Next month, electric bills will rise once again for PSE&G customers – by an average of $10.80 a month, or 11.7 percent. The utility has 2 million electric customers.

In his lawsuit, Murphy, a sales manager for a semiconductor business, is asking the court to invalidate a surcharge of $5.50 a month for the typical residential customer. The surcharge was intended to compensate PSE&G for so-called "stranded costs" it would suffer after the utility convinced lawmak ers during debate on deregulation that its power plants would be worth less in a competitive market.

In fact, competition did not flourish as expected and, today, the utility's plants are worth more than they were in 1999, a point the company conceded in documents filed last year during administrative hearings into its failed merger at tempt with Chicago-based Exelon.

In a recent earnings call, company executives said its power generation unit, called PSEG Power, is projected to make a profit of between $825million and $905million in the current fiscal year.

"It just isn't right," said Mur phy, a father of three who lives in Oradell.

His lawsuit is seeking certifica tion as a class action on behalf of all PSE&G customers to block col lection of the surcharges and to recover all the money collected from ratepayers to date.

Paul Rosengren, a spokesman for PSE&G's parent, Newark- based Public Service Enterprise Group, said the issue has been fully litigated in the past, and the company's position has been upheld by the New Jersey Supreme Court.

"We have no reason to believe this suit has a reasonable chance of success," he said.

But Daniel Sponseller, a Pennsylvania utility lawyer who represents Murphy, said the lawsuit raises constitutional challenges that have not been previously explored.

In essence, Murphy's lawsuit ar gues the legislation deregulating the electric power industry provided special government protection to PSE&G from the effects of competition, a violation of the state constitution, Sponseller said.

Under the law, the surcharge is authorized to be collected until 2017. As of March 31, $1.7 billion re mains to be collected, according to Rosengren.

The lawsuit was applauded by longtime critics of the deregulation law.

"We are, of course, very glad to see the suit," said Ev Liebman, program director for New Jersey Citizen Action. "We have always op posed the collection of these costs from ratepayers, but it is even more outrageous today as the costs are no longer stranded.

"The plants are worth a ton of money and are reaping huge profits for the company. Why should ratepayers continue to pay?"

Hal Bozarth, a lobbyist for the Chemistry Council of New Jersey and frequent adversary of the utility, agreed.

"It's wonderful," Bozarth said of Murphy's lawsuit. "It's just outright thievery by the monopoly."

New Jersey Public Advocate Ronald Chen declined to comment on the litigation, but noted his office is concerned about soaring electric rates, which have gone up approximately 80 percent in the last three years.

The state Board of Public Utilities, which regulates PSE&G and other power companies in New Jersey, declined to comment on the case.

Copyright 2007 The Star-Ledger

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