Energy Efficiency World

Murphy BPU Dodges & Defers Huge Corporate Ripoff

NJ Spotlight puff piece parrots Murphy spin

Note how BPU masks a huge debate in a slogan of efforts to “ensure investment”.

What that really means is that BPU must guarantee high enough monopoly profits to attract greedy PSEG & Wall Street investment.

I just started looking into NJ’s energy efficiency program, after recently learning that the Clean Energy Act (the law that funded the notorious billion dollar nuke bailout and put a 7% cap on rate increases to support renewables) also mandated that BPU impose a special new “surcharge” to guarantee “full recovery” of “revenue impact of sales losses resulting from implementation of the energy efficiency”, see:

“Each electric public utility and gas public utility shall file annually with the board a petition to recover on a full and current basis through a surcharge all reasonable and prudent costs incurred as a result of energy efficiency programs and peak demand reduction programs required pursuant to this section, including but not limited to recovery of and on capital investment, and the revenue impact of sales losses resulting from implementation of the energy efficiency and peak demand reduction schedules, which shall be determined by the board pursuant to section 13 of P.L.2007, c.340 (C.48:3-98.1).

Get that?

Private corporations are guaranteed to recover all reductions in revenues and profits from energy efficiency, and you pay for it.

This is truly remarkable. What you should save in monthly utility bills for reducing your energy consumption is wiped out completely – on a 1 to 1 basis – by a special surcharge on your bill to guarantee PSEG profits.

So, despite the fact that you use less energy, your monthly utility bill remains the same, and you must pay more for the investments you made in energy efficiency, like new windows, insulation, a super efficient furnace, AC, heat pump, LED’s, and/or refrigerator, etc.

On top of that, PSEG and friends are seeking to profit on their expenditures for energy efficiency programs, which you also will pay for in this new special “surcharge” mandated by the Clean Energy Act.

I call that an outrageous corporate scam.

But the BPU and NJ Spotlight ignored all that controversy, as reported in today’s NJ Spotlight puff piece.

Actually, it’s worse.

NJ Spotlight swallowed the Murphy Administration’s Orwellian spin and described a continuing $87 million diversion of Clean Energy Fund revenues as a “phase out”, and a roll over of unexpended funds from last year’s budget as “extra funding”.

So, let me be clear: A flat energy efficiency program budget and a diversion of $87 million in Clean Energy Funds directly contradict Gov. Murphy’s commitments to a transition to 100% clean energy and to battle climate change.

The NJ Spotlight puff piece is based on BPU’s energy efficiency budget plan.

I reviewed that plan to try to understand how BPU engaged the controversial issues that will arise as the public learns about this special “surcharge” to guarantee private corporate monopoly profits.

BPU not only ignored these issues, they actually masked them in their program budget report.

Specifically, BPU’s Report does not even specifically mention the Clean Energy Act’s mandate that they impose a new “surcharge”.

The Report buries and masks this issue in the following bureaucratic jargon and euphemism:

The CEA requires the Board to adopt an electric and gas energy efficiency program in order to ensure investment in cost- effective energy efficiency measures, ensure universal access to energy efficiency measures, and serve the needs of low-income communities. (@ page 6)

Note how BPU masks a huge debate in a slogan of efforts to “ensure investment”.

What that really means is that BPU must guarantee high enough monopoly profits to attract greedy PSEG & Wall Street investment.

The Report not only fails to engage and masks this controversial issue, it delays consideration of it until next year (under another bureaucratic euphemism: “cost recovery“):

In FY20, additional discussions will take place related to utility-specific energy usage and peak demand reduction targets, the program structure, cost recovery, utility filing requirements, program timeframes, evaluation, and reporting requirements . (@p. 7)

So again, let me be clear: Failure of the Murphy BPU to engage this fundamental issue of allocation of the financial burdens of financing critical investments in energy efficiency in it’s program budget planning documents is NOT leadership, and it belies Gov. Murphy’s commitments on clean energy and climate change.

The Murphy BPU policy reflects a long history of privatization and deference to corporate greed.

Check out this history of the BPU energy efficiency program, which reflects an emphasis on privatization and corporate profits, described in BPU’s own budget plan:

From 2001 to 2006, the [energy efficiency] programs were managed by the state’s electric and natural gas utilities. In 2004, the Board determined it would manage NJCEP going forward and in 2005- 2006, the Board issued RFPs to contract the necessary administrative services to assist in oversight. In 2006, Honeywell, Inc. was engaged to manage the RE and residential EE programs, and TRC was engaged to manage the C&I EE programs. In 2007, AEG was engaged as the NJCEP Program Coordinator. These contracts, following multiple extensions, terminated on March 31, 2016.

In April 2015, the Board, through the Department of the Treasury, Division of Purchase and Property (Treasury), issued RFP 16-X-23938 seeking proposals for a single Program Administrator to provide the services then being provided by Honeywell, TRC, and AEG (2015 RFP). On December 1, 2015, Treasury awarded the Program Administrator contract to AEG. Subsequently, on January 13, 2017, TRC Environmental Corporation acquired,AEG’s New Jersey operation including the NJCEP Program Administrator contract from AEG and assumed AEG’s rights and obligations thereunder. TRC has subcontracted portions of the work under its contract to CLEAResult Consulting, Inc. and Energy Futures Group, Inc. AEG and, subsequently, TRC have managed programs since March 1, 2016, which marked the conclusion of the transition period set out in the RFP. (@ page 5)

It’s all one big corporate profit scam. No wonder the program has such poor performance.

Finally, let me illustrate this issue with a simple hypothetical (ballpark hypothetical numbers, so don’t quote me on these. The Christie BPU Energy Master Plan provides real data, if you’re interested in using real data).

An average NJ home pays about $150/month for electricity ($1,800/year). For ease of calculations, let’s round that up to $2,000 per year.

[Note: For statewide context, lets assume there are 4 million households in NJ (Census estimates 3.6 million), that amounts to $8 billion in revenue for just the electric power of the residential sector. Considering the commercial and industrial sector (which consumes about twice as much energy as residential) and gas in addition to electric, and we’re talking huge revenues and profits for energy services. The US Energy Information Agency estimated $18 billion in total energy expenditures in 2016 (but this is broader than utility electric and gas).

If even 10% of this revenue is reduced due to energy efficiency (and the BPU Report suggests closer to 25% is technically feasible and cost effective), then ratepayers, who must guarantee this lost revenue under the NJ Clean Energy Act, will be ripped off to the tune of billions of dollars a year in corporate welfare.]

The recent BPU consultant’s report on energy efficiency suggests that it is technologically feasible and cost effective to reduce energy use through efficiency by about 22%. For ease of calculation, lets round that up to 25%. Let’s also assume “cost effective” means a 10 year payback period (no interest and discount rates used here, I’m trying to keep it simple).

So, let’s say you reduce your energy consumption by 25%. That should translate into a 25% reduction in your $2,000/year energy bill, or $500/year.

But to achieve this 25% energy reduction, you had to spend $5,000 on efficiency (insulation, new windows, new furnace, new refrigerator, LED’s, and/or heat pump/AC). You financed that $5,000 investment with a 10 year home equity loan, paying the monthly payments with your anticipated 25% reductions in your monthly energy bill.

But after you do the numbers and finance these energy efficiency investments, you get whacked by a new special “surcharge” to guarantee the revenues PSEG lost as a result of your reduced energy consumption!

So, your monthly electric bill DOES NOT GO DOWN, IT STAYS THE SAME, WHILE YOU HAVE TO MAKE NEW MONTHLY PAYMENTS TO FINANCE THE ENERGY EFFICIENCY INVESTMENTS (and this assumes that BPU does not increase the “surcharge” to provide profits on PSEG’s own new energy efficiency investments, which would make your monthly bill even MORE).

Who would ever do this?

Given this financial reality,  I can only interpret the “full recovery” guarantee in the Clean Energy Act as a cynical poison pill to block any real reduction in energy use via energy efficiency.