Assembly Speaker Craig Coughlin said upcoming legislative hearings will help lawmakers decide what to do to curb rising energy prices. (Photo by Mary Iuvone for New Jersey Monitor)
New Jersey Democrats are turning their attention to electricity prices amid a furor over high utility bills this winter and looming rate hikes that will push up power rates this year at about the time of June’s legislative primaries.
Democrats have introduced a seven-bill package meant to control electricity rate growth that includes measures to streamline utility assistance applications, set new processes to determine utilities’ profit margins, and sunset a surcharge that increases monthly electricity bills, among other things.
Legislators’ newfound focus on electricity rates comes after the Board of Public Utilities last month approved auction results that are expected to add roughly $25 to customers’ monthly energy bills and amid broader concern about electricity prices. This comes as an AI boom sends energy demand surging and supply struggles to keep pace.
“What we’re worried about in the immediate is the impact on ratepayers in New Jersey,” Assembly Speaker Craig Coughlin (D-Middlesex) told the New Jersey Monitor. “There are people who are struggling because prices have gone up, and to add this on top of that is a substantial increase.”
Coughlin and Senate President Nicholas Scutari (D-Union) last week announced they will hold joint hearings to determine other methods to slow growing utility costs. Coughlin said they have yet to set dates for those hearings.
Republican officials have blamed surging costs on Gov. Phil Murphy’s energy agenda, which has broadly favored renewables like wind and solar over fossil or nuclear sources that generate nearly all of the state’s electricity.
“The problem is our supply has diminished incredibly and we have not done anything under these current energy policies to address it,” said Assemblyman Alex Sauickie (R-Ocean). “That means if we don’t do something like natural gas immediately, this problem is going to last for years, several years.”
Assembly Democrats in late February circulated talking points that sought to lay the blame for rising rates at the feet of the Board of Public Utilities, Republicans, and PJM Interconnection, the grid operator for New Jersey and 12 other states.
A PJM spokesperson noted New Jersey imports more energy than it produces. Some other states on its grid had not seen similar rate increases, he said, adding the state’s renewable energy goals had contributed to the present cost increases.
“Policy is a major factor as to why we are experiencing this supply-demand crunch. Decarbonization policies have driven resources off of the system while demand is increasing dramatically on the system due to data center proliferation and the onshoring of the manufacturing industry,” said Dan Lockwood, the spokesperson.
He added many renewable energy projects had stumbled over hurdles — like supply chain disruptions and permitting issues — that lay well outside PJM’s control.
Dems’ legislation
One bill in Democrats’ new package would require utilities to join regional transmission organizations like PJM.
Federal regulations allow utilities that voluntarily join these organizations to collect an extra 0.5-percentage-point return on equity — called an RTO adder — and the bill is an attempt to prevent utilities from collecting that.
“Isn’t that their job to join these groups … to be able to purchase our power that we need?” said bill sponsor Assemblywoman Andrea Katz (D-Burlington). “I don’t get paid extra just for going to vote on legislation. That’s my job.”
Utilities pass their expenses — including for capital investments — directly to consumers, and they are allowed to profit off their capital investments at negotiated rates. In New Jersey, that rate, called the return on equity, is typically 9.6%.
Barring New Jersey utilities from collecting money through the RTO adder would produce savings, though they would be limited.
Though Katz’s bill has no fiscal note attached to it, analysis on a similar bill by Maryland’s Office of People’s Counsel found eliminating the RTO adder would save ratepayers there roughly $20 million each year. Maryland ratepayers spent nearly $8.9 billion on electricity in 2024, according to Energy Information Administration Data.
The savings won’t be much greater for New Jersey ratepayers, who purchased nearly $12 billion of electricity last year, per federal data. In 2021, the Board of Public Utilities reduced PSE&G’s return on equity rate by 1.28 percentage points — about two-and-a-half times the reduction of barring RTO adders — and said the lower rate would save PSE&G customers roughly $36 a year.
New Jersey Rate Counsel Brian Lipman, whose office advocates for ratepayers on utility matters, said his office backs the mandate, adding it would “save ratepayers hundreds of millions of dollars.” He said his office also supports lower rates for utility providers’ return on equity,
In past legislative hearings, Lipman has repeatedly urged lawmakers to forgo additional mandates on utilities, noting the cost of utilities’ investments are repaid by ratepayers at a markup. Those mandates can include requirements to build infrastructure to support, for example, electric vehicles.
Coughlin declined to commit to forgoing additional mandates on utilities, saying lawmakers need more information before taking action.
“We haven’t taken anything off the table, nor are we committed to doing anything specifically. That’s the purpose of having the hearings,” Coughlin said.
The impact of other proposed changes, including one that calls for the Board of Public Utilities to consider the lowest reasonable rate of return when setting utility rates, rather than a fair and reasonable one, is unclear.
Murphy has sought to build renewable energy sources in New Jersey, with the goal of having New Jersey draw 100% of its from “clean energy” sources by 2035, but renewable sources still account for an overwhelming minority of the state’s power generation, about 8.3% in 2022, according to the Department of Environmental Protection.
What renewable energy projects have come online have not filled energy losses from shuttered fossil fuel plants, including its last two coal plants in 2022, and the closure of Oyster Creek Nuclear Generating Station in 2018. Meanwhile, public and political opposition has canceled natural gas projects proposed for Woodbridge, North Bergen, and Kearny.
The generation losses have pushed power produced in other states on PJM’s grid, including in coal plants, to New Jersey, especially when usage surged in the cold of winter, said Greg Lalevee, business administrator for the International Union of Operating Engineers Local 825.
He urged the state to expand its generation capacity, even if it means standing up gas plants that could be decommissioned or converted to hydrogen as new technology becomes available or renewable projects begin operating.
“My view is this: I think we need to put as much electric in the grid as possible,” said Lalevee, whose members would benefit from jobs on energy projects.
Coughlin declined to say whether rising rates have caused him to look more favorably upon natural gas projects, which accounted for 48.7% of the state’s energy generation in 2022, saying only that he was “focused on solving the problem.”
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