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<title>March 2000: NJBPU Considers Two Energy Efficiency/Renewable Plans</title>
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<p align="left"><strong><small><font face="Arial">About The Author:</font></small></strong></p>
<p align="left"><font face="Arial" style="font-size: 9pt">Robert A. Olson is a partner in the law firm of
Brown, Olson & Gould, P.C. which maintains a nationwide practice in energy law,
public utility law and related commercial transactions.</font></p>
<p><small><font face="Arial"><font style="font-size: 9pt">He can be reached at:</font><br>
<br>
<b><font color="#0000FF">Brown, Olson & Gould, PC</font></b><br>
2 Delta Drive<br>
Suite 301<br>
Concord, NH 03301<br>
<a href="mailto:[email protected]">[email protected]</a><br>
(603) 225-9716<br>
<a href="mailto:[email protected]"></a></font></small></p>
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<td width="70%" valign="top"><img src="../images/statelin.gif" alt="STATELINE by Robert Olson" border="0" WIDTH="375" HEIGHT="75"><p><b><u><br>
March 2000<br>
</u><font face="Arial"><big><big><big>NJBPU Considers Two Energy Efficiency/
Renewable Plans </big></big></big></font></b><strong><br>
by Robert Olson -- Brown, Olson and Wilson, P.C.<br>
</strong><font face="Arial" size="2">(<em>originally published by PMA OnLine Magazine:
2000/04</em>)</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">Under New Jersey’s restructuring
law (the Act), the Board of Public Utilities (NJBPU) must undertake a
"comprehensive resource analysis" to determine a funding plan
for energy efficiency (EE) and renewable energy (RE) programs. The plan
will determine program cost recovery, performance incentives, and which
programs are funded by the "societal benefits charge" (SBC)
passed on to ratepayers. Two groups have filed plans with the NJBPU for
review, one headed by the BPU’s Division of Ratepayer Advocate (the DRA
Plan), the other headed by the investor-owned utility Public Service
Electric & Gas (PSE&G Plan).</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">The Act, which became effective on
February 9, 1999, states that the plan’s funding must be at a minimum
level of at least 40% of the total funds collected in electric and gas
utility rates on the effective date of the act for demand-side management
programs for a four-year period. The law further provides that twenty-five
percent of the funding must be used for RE programs.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">The DRA Plan proposes to create,
subject to NJBPU oversight, an Independent Statewide Administrator (ISA)
to administer the EE and RE programs. The DRA Plan also creates an
Advisory Committee, to address items such as energy savings targets,
technology market penetration targets, program design, bidding procedures,
program incentive levels, performance standards, program measurement and
verification protocols, and policy guidelines for renegotiating standard
offer contracts. The proposed Advisory Committee would consist of
representatives from entities such as the DRA, the Department of
Environmental Protection, suppliers of renewable technologies and energy
efficiency measures, academic institutions, public interest groups, and
utilities.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">Under the DRA Plan, funding for the
programs would amount to $128 million annually for each of the initial
four years. Of this amount, $96 million would be used for EE programs and
$32 million for RE programs. The funding for RE programs would be
collected exclusively from electric rates; the EE funding would be divided
between gas and electric rates in proportion to the total sales revenues
for each, resulting in 77% of funds being collected from electric rates,
and 23% from gas rates.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">All EE programs receiving SBC
funding under the DRA Plan are required to function on a competitive bid
basis, and negotiated contracts would not be permitted. The DRA Plan would
place 45% of SBC EE funds toward "Pay-for-Savings" programs,
which pay vendors on the basis of energy savings provided to their
customers. Rules would be established to encourage multiple vendor
participation by limiting the winning bidder funding to 50% of the funds.
Another 45% of SBC EE funds would be directed toward
"Pay-for-Technology" programs, which include items such as new
construction funding. Another EE program the DRA Plan endorses is a
"Pay-for-Infrastructure" program. This program funds research
and development.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">The DRA Plan also addresses SBC
funding of RE programs. Under the plan, funding would not be used to
support technologies already receiving market support. The DRA Plan
includes within this category: projects used to meet the Act’s
renewables portfolio standard, methane from landfills, and other
technologies as identified by the Advisory Committee to meet this
requirement. The plan further provides that renewable-fueled fuel cells
should receive SBC funding, but that technologies relying on fossil fuels
should have less incentives. Forty percent of RE program funds would be
devoted to a project incentive program and to customer credits. In the
project incentive program, project developers would respond to requests
for proposals to receive funding. Eligible technologies for this program
include wind turbine installations and renewable-fueled fuel cells larger
than 100 kilowatts, photovoltaic projects larger than 500 kilowatts, and
biomass and geothermal technologies. The customer credit program would
provide customers credits for the purchase of renewable energy. Another
40% of RE program funding would be used to encourage small scale
technologies. Eligible technologies include photovoltaics, solar thermal
electric generation, wind turbine installations smaller than 100
kilowatts, and renewable-fueled fuel cells smaller than 100 kilowatts.
Funds would be awarded on a "first come, first serve" basis,
with a cap of 60% of total project costs. Fifty percent of the funding
would be applied for systems of 10 kilowatts or less, 25% to systems of
ten to 100 kilowatts, and 25% to systems of 100 to 500 kilowatts. The
remaining 20% of RE program funds would be used for infrastructure
programs, such as research and development, community education, and
economic development.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">The PSE&G Plan establishes a
statewide funding level of $423 million over a four-year period, beginning
with $70 million in 2000, $108 million in 2001, $120 million in 2002, and
$125 million in 2003. During the period 2000 through 2008, 25% of all new
program funds would be allocated to RE programs. Each utility is assigned
a share of the funding under the PSE&G Plan. The PSE&G Plan
further provides that existing programs, as well as lost revenues related
to EE programs, would be recoverable in each utility’s SBC. For the
period 2000 through 2003, on average each utility will allocate 17% of its
total new program budget to RE programs, although this allocation may
increase to 25% over the four year period. Funding also would be directed
to projects such as natural gas-fired fuel cells. Electric funding would
be split evenly between utility-administered programs and programs
administered by an ISA. Utility-administered plans are to be implemented
consistently with respect to program structure, incentive levels,
marketing, quality assurance, and service. The Plan would establish
collaborative consultants to evaluate the programs. The PSE&G Plan
proposes that no one technology would receive more than 50% of a program’s
funding and that no more than 50% of any block of funding would support
systems greater than 10 kilowatts without NJBPU approval.</font></p>
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<blockquote>
<p align="left"><font face="Arial">
<small>Robert A. Olson is a partner in the law firm of Brown, Olson &
Gould P.C.
which maintains a nationwide practice in energy law, public utility law and related
commercial transactions. He can be reached at:</small></font><p align="center">
<font face="Arial"><small><font color="#0000FF"><b>Brown, Olson & Gould, PC</b></font><br>
2 Delta Drive, Suite 301<br>
Concord, NH 03301 <br>
<br>
<a href="mailto:[email protected]">[email protected]</a> | (603) 225-9716<a href="mailto:[email protected]"></a></small></font>
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