Public Service Enterprise Group Chairman, President and CEO Ralph Izzo on July 28 said that Public Service Electric and Gas continues to make progress in its 2017 plan to invest about $3.4 billion in transmission and distribution upgrades.
Speaking during PSEG’s 2Q17 earnings call, Izzo also noted: “Earlier this week, PSE&G reached an agreement in principal with the [New Jersey Board of Public Utilities, or] BPU staff and the Rate Counsel, which provides for a $69 million extension of its investment in energy efficiency equipment for hospitals, multifamily housing, and other sectors. The agreement represents more than 90 percent of PSE&G’s original request, and will bring PSE&G’s cumulative investment in energy efficiency to approximately $400 million.”
He also noted that PSE&G will file a distribution base rate case with the BPU by Nov. 1.
He said that the timing of that filing was agreed to in the settlement of the Energy Strong program, which, according to PSEG’s website, is a $1.22 billion program that will allow the utility to proactively protect and strengthen its electric and gas systems against severe weather damage.
“The case will provide PSE&G with the opportunity to reset assumptions on sales and O&M growth, as well as provide the opportunity to recover investments not recognized in various clauses since our last base rate proceeding, which was settled in 2010,” he said. “It will also give us the opportunity to recover prior approved storm costs.”
As part of the filing, the company will request approval for a decoupling of distribution revenue from sales volume to support larger-scale energy efficiency investments, he said.
Also speaking on the call was Daniel Cregg, PSEG executive vice president and CFO, who noted that PSE&G’s investment in transmission is expected to grow to represent about $7.6 billion of rate base at the end of 2017, which would be 45 percent of the company’s year-end consolidated rate base, he said.
Under Energy Strong, electric rates are adjusted two times during the year, in March and September, while gas rates are adjusted each year in September. Under the Gas System Modernization Program, gas rates are adjusted each year in January to reflect the investment made during the prior year, he added.
“The combined annual revenue increase in 2017 from these programs is forecasted to be approximately $56 million,” he said.
PSE&G continues to advance its five-year, $12.3 billion program in transmission and distribution, and continues to identify incremental investments, Cregg said.
Among other things, Izzo noted that PSEG Power’s primary market in PJM Interconnection is experiencing improvement in capacity prices.
“In May of this year, PJM announced the results of the RPM capacity auction for the 2020 and 2021 delivery year,” he said. “Power cleared approximately 7,800 MW of its generating capacity at an average price of $174 per megawatt-day. The average price received by Power was higher than prior auctions and continues to represent a premium to the price for capacity in the RTO. However, the number of megawatts which cleared the auction declined from the amount we have cleared in the past. Our results reflect the higher price resulting from the increased risk in the market associated with PJM’s move to 100 percent capacity performance requirements and the absence of available capacity to meet emergency situations following the retirement of Hudson and Mercer.”
The results of the latest auction provide stability in Power’s capacity revenue through calendar year 2020, he said.
“The energy markets, on the other hand, continue to be impacted by flat demand and excess capacity, which has hurt the return on our base load resources as the average price on energy hedges declines,” Izzo continued. “Power continues to advocate for policies at the federal level that would correct flaws in the wholesale market design that suppress prices and provide adequate recognition of the value that fuel diversity brings to a competitive wholesale market. We believe that state action is also critical and can be done in a way that both maintains the integrity of the wholesale market and serves as a bridge until a regional or federal solution is in place.”