The buried story and the hidden energy tax

Great find in the PolitickerNJ – thanks Star Ledger for bringing this to our attention – except it’s worthy of front page news..

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Residential and commercial electric customers join forces to pull the plug on a billion buck boondoggle by NJ’s largest utility company. And why isn’t this front page news?

That’s the real point of Wednesday’s Star Ledger story about a Public Advocate-led ratepayer complaint against PSE&G for surcharges on electric customers to pay – again – for the utility giant’s decades old power plants. Only problem is the story was buried inside the Business section, below the fold, and a mere three column inches.

There’s a much bigger story here.Residential electric customer will be paying, on average, $60 a year to PSE&G until 2017 to pay for power plants that supposedly should be gathering cob webs as new competitors flock to NJ’s energy industry.  It’s called Stranded Cost Recovery and it’s part of the State’s “Electric Discount & Energy Competition Act.”    PSE&G and the other NJ utilities whined to the Legislature that electric competition would cause power plants they previously built (and you and I paid for) to be shuttered for lack of customers.

The utilities wanted their shareholders to be made whole for earlier investments in generating facilities.  Instead they’re getting fat.

As the Ledger’s Tom Johnson wrote: “. . . the plants, since spun off to an unregulated unit of PSE&G’s parent company, have become hugely lucrative.”

Heck, PSE&G’s power plants are now selling electricity to the other NJ utilities too!

Here’s the rundown:

 Number of residential electric competitors vying for PSE&G customers: 0

Number of PSE&G electric customers at the beginning of electric competition in 1999: 1.9 million

Number of PSE&G electric customers today: 2.1 million

PSE&G stock price in 1999: $40

PSE&G stock price today: $100 

PSE&G’s ratepayer-financed Stranded Cost Recovery windfall: $1 billion

Credit the Ledger for at least covering the story and Johnson for clarity in reporting on a complicated issue.  But give the story the placement it merits – – right up there with the costly proposed toll hikes.

 Oh yeah, and it’s also not  a bad idea to make the story more visible to “everyday” readers who are paying the PSE&G surcharge, not just the biz types who scan the financial sections of the newspaper.

 Psst…tip to NJ media on another missed front page story: You may want to look at the hit to electric ratepayers of another of PSE&G’s Energy Competition Act financial shell game.  It’s called a “securitization transition charge” on customers’ bills for the interest hedge from PSE&G’s bond sale back in 1999 to cover the costs of the transition to deregulation. PSE&G made a bet to get paid by it’s bond company if interest rates rose and made its borrowing costs too expensive. PSE&G’s customers, not its investors, would foot the bill on the bond debt if interest rates went down. So guess who’s paying now?

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No Lack of Curiosity, or Civility, at Corzine’s First Forum on Toll Proposal

From Today’s NY Times (text highlights are my own)

John T. McGinnity of Springfield, N.J., was one of more than 900 people to attend Gov. Jon S. Corzine’s town hall meeting.

LIVINGSTON, N.J. — One person blurted out that Gov. Jon S. Corzine should raise the gas tax. Another yelled that New Jersey’s biggest yoke was its overabundance of elected officials.

But surprisingly, those were the exceptions rather than the rule on Saturday, when Mr. Corzine convened his first town hall meeting on his plan to drastically increase tolls in order to pay off billions of dollars in debt and maintain the state’s bridges and highways.

More than 900 people showed up (rumors buzzing that 50 of these were union employees bused in by the administration) for the meeting at Livingston High School, prompting organizers to use another room for overflow. And while many people expressed qualms, the atmosphere was generally deferential throughout the two-hour meeting.

“I’m surprised there was less anger,” said David Shulman, a semi-retired economist from Berkeley Heights who believes that the plan asks too much of toll-road drivers. “People were more polite and tame. But he did a good job, and there’s no question he’s a professional.”

If Mr. Corzine could bottle the reaction in Livingston and replicate it 20 times over the next two months, then he would have reason to feel cautiously upbeat that residents will at least listen seriously to his ideas, and perhaps even support them.

Then again, Mr. Corzine was not exactly in hostile territory, since Livingston, which leans Democratic, is an affluent and educated community in Essex County. Perhaps more interesting, based on the hometowns of those who managed to ask questions, and the observations of longtime residents, was that most people were from out of town, coming from places like Sparta, in the northwest corner of the state, and Freehold, in its midsection.

One-third of the 21 people who asked questions, in fact, used the occasion to ask Mr. Corzine about subjects other than the toll roads, with the new school financing formula being the most common.

Mr. Corzine began the meeting with a 46-minute PowerPoint presentation, detailing the state’s financial problems and offering unpalatable options to fix those problems, like increasing the income tax by 20 percent or the sales tax by 30 percent.

A third idea, to increase the gas tax 45 to 50 cents a gallon, prompted one person to say, “That you should do!”

That brought Mr. Corzine to the fourth option — his plan. Tolls on the New Jersey Turnpike, Garden State Parkway and Atlantic City Expressway would be increased by a maximum of 50 percent four times in 12 years — in 2010, 2014, 2018 and 2022 — and also would be adjusted for inflation. A portion of a fourth highway, Route 440, would become a toll road. Toll increases would continue to be indexed for inflation until 2085.

A nonprofit corporation set up by the state to replace the New Jersey Turnpike Authority would issue bonds secured by future toll revenues that would generate up to $38 billion. Those billions, in turn, would halve the state’s debt of $32 billion and inject money into the Transportation Trust Fund, which is nearly depleted, for road and bridge repairs and other projects.

Mr. Corzine noted that there would be discounts to frequent users of the toll roads, and that more than half of the New Jersey Turnpike’s revenues came from out-of-state drivers. But he acknowledged that truckers and other commercial users of the toll roads would probably eventually pass along some of the added costs to consumers.

“Everyone is going to end up paying some of the toll hikes,” he said.

Some people asked Mr. Corzine whether he would consider scaling back his plan, and mixing in modest tax increases. But Mr. Corzine — who pushed through a penny increase in the sales tax in 2006 to plug a budget deficit — said that few legislators would have the stomach for more.

After the meeting, Peter Humphreys, a securities lawyer who is the founder of a new citizens’ watchdog group, Save Our Assets NJ, said that he felt that Mr. Corzine was “trying to scare people a little bit,” and that questions on the fine print of the proposal remained unanswered.

“I thought he did very well, but I don’t think he’s answered the concerns we have,” said Mr. Humphreys, who lives in nearby Millburn.