The Star-Ledger

State Official Calls For PSE&G Refund

The Star-Ledger — Monday, July 16, 2007

BY TOM JOHNSON

Public Service Electric & Gas should refund $130 million to ratepayers because the state's largest utility overcollected on a special charge it assessed following deregulation of the energy industry eight years ago, the state Public Advocate is expected to argue in a court filing.

In papers scheduled to be filed this morning with the state Office of Administrative Law, Public Advocate Ronald Chen wants the Newark-based utility to return money it used to pay off a loan from a sister unit, PSEG Power, at the time of the break-up of PSE&G's electric monopoly in 1999.

"With electric rates going up every year, every penny counts," Chen said. "Yet PSE&G is refusing to return $130 million they owe to ratepayers. This is totally unacceptable and we are doing everything we can to get this money back into ratepayers' pocketbooks where it belongs."

PSE&G's 1.9 million customers have seen their utility bills steadily rise since the state lifted a cap on bills that was imposed as part of the deregulation of the energy sec tor. Last month, customers' bills jumped 11.7 percent – or more than $10 a month on average – be cause of higher power costs.

If the Public Advocate's effort is successful, the average refund per customer would be approximately $17, according to Chen's office.

The case stems from special charges added to customers' bills after PSE&G sold its fleet of power-generating stations to PSEG Power as part of deregulation. Ratepayers were hit with a special assessment to help pay a loan to PSE&G from PSEG Power as part of the transaction, but the charge stayed on customers' bills even after the loan was fully repaid, the Public Advocate says.

Both PSE&G and PSEG Power are units of Public Service Enterprise Group, one of the nation's largest utility and energy compa nies.

In 2003, PSE&G acknowledged customers had overpaid and re turned $203 million. But an analysis by the Public Advocate's Division of Rate Counsel shows PSE&G still owes ratepayers about $130 million.

The utility contends customers are not owed anything, a stance it says has been upheld by two independent audits.

"They are trying to undo one little aspect of deregulation," said Paul Rosengren, a spokesman for Newark-based Public Service Enterprise Group.

The dispute briefly became an issue last year during negotiations over the proposed sale of Public Service Enterprise Group to Exelon of Chicago. In the end, both companies balked at conces sions sought by the state and walked away from the deal.

At that point, the state Board of Public Utilities referred the dispute about the overcharge to the Office of Administrative Law. An AOL judge will review the case and issue a recommendation to the BPU, which will make the final decision.

In its brief to the AOL judge, the Public Advocate's Rate Counsel will argue PSE&G's customers paid off the $540million loan on a monthly basis, but the utility calcu lated the interest on the loan as if the customers had made only one payment per year. PSE&G refuses to pay interest on the overcharges despite the Rate Counsel's insistence it do so.

Rosengren argued the original BPU order authorizing the special charge did not include interest on either overcollections or undercol lections.

Unlike PSE&G, the state's other three electric utilities did not impose such a surcharge because they sold off their power plants to other companies.

In addition to the Public Advocate's case, Public Service also faces a lawsuit by a Bergen County man who is seeking to overturn a key provision of the 1999 law that broke up the state's electric monopolies. In the lawsuit, Richard Murphy is asking a Superior Court judge to invalidate a surcharge of about $5.50 per month for the typical residential customer.

The surcharge was intended to compensate PSE&G for so-called stranded costs it would incur be cause its power plants were ex pected to be worth less in a more competitive environment. The plants actually have increased in value because competition did not materialize as expected. The case is pending.

Copyright 2007 The Star-Ledger

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