Press of Atlantic City

Electricity Auction Determines New Rates — Usually Higher Ones

Press of Atlantic City — Saturday, January 31, 2009

Staff Writer

An annual, online auction that sets how much New Jersey consumers and businesses pay for electricity kicked off Friday and will continue Monday.

And if the past is any indication, this year's results are expected to increase energy bills again — which would further strain consumers already chafing under the economic downturn.

Monitored by the New Jersey Board of Public Utilities, the auction — now in its eighth year — has been criticized by the state Public Advocate's Office and consumer advocacy groups for failing to provide the lower electricity rates initially touted when the state ended regulation of the energy market 10 years ago.

The BPU has adopted some changes to this year's electricity auction, although none that completely overhauls how it is designed and run.

"The board believes that the auction process ... has worked well and has resulted in the best prices possible at the time," the board wrote in November.

Atlantic City Electric is one of four electricity utilities that participate in the auction, which helps to determine electricity costs for the year starting June 1. The utilities are purchasing their power from energy and investment companies. Those companies are competing in the auction to bid the lowest price at which to sell their electricity.

Before deregulation, the utilities were on their own in how they bought power.

Last year's was the third consecutive auction to bring double-digit increases to consumers' bills. Monthly bills for Atlantic City Electric customers increased by 11.7 percent, or $12.41 for those using the average 650 kilowatts per month.

None of the utilities can profit from increasing energy costs, and instead pass them along to ratepayers.

According to the BPU, one reason for the increase in prices last year was because of the rising costs of coal, natural gas and oil, which are used to fuel the power plants that create electricity.

A barrel of oil spiked dramatically in July, although oil prices have since dropped more than 70 percent.

"If the BPU asserts that prices have been rising — and in some cases dramatically — because of the underlying fuel sources, given that we have seen those prices drop ... we should see that with electricity bills," said Ev Liebman, a director with New Jersey Citizen Action, a watchdog coalition. "If we don't, then what is their explanation?"

The federal Energy Information Administration this month forecasted U.S. residential electricity prices to grow by 2.3 percent in 2009 and 2 percent in 2010 — due, in part, to utilities needing to cover the cost of upgrades to generation and transmission facilities.

Increased costs are being felt by consumers such as Debbie Tittl, of Millville, who said her monthly electricity bill was manageable two years ago, when it hovered around $130. Now she pays about $175 per month.

She waited in line more than two hours Thursday to speak with a nonprofit agency at an energy expo at the Cumberland Mall. The expo featured utilities and social services groups providing assistance to consumers who cannot afford their energy bills.

"They said my income is too high to get (financial aid for) my electricity," said Tittl, who works in the packing department of a glass manufacturer. "They were looking at my gross income, not my net. But I have expenses. I have a husband who is on disability, too."

The number of reported incidences of electricity shutoffs — which occur because of nonpayment — reached 173,934 statewide in 2008, according to the BPU, down 0.9 percent from 2007. However, the total number of shutoffs last year was 26 percent higher from 2005 and
21 percent higher from 2006.

"It's a terrible crisis," Liebman said of increasing energy costs. "It is putting businesses large and small out of business. Individuals are really struggling to pay their bills. There's just no relief in sight."

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