NEWARK — New Jersey's public utilities board is set to vote on a nearly half-billion-dollar proposal by the state's largest utility to expand solar power production, a plan the state-paid advocate for ratepayers has sharply criticized as creating an unfair market advantage subsidized by utility customers.
The Board of Public Utilities is expected to vote on Public Service Electric & Gas Co.'s $446 million plan at its board meeting Wednesday in Trenton. If approved, it could go into effect immediately.
The proposal has two components: a $247 million extension of the utility's Solar4All (S4A) program through 2016 that seeks to develop solar installations primarily on unused landfills and former industrial sites, known as brownfields; and a nearly $200 million extension through 2017 of a solar loan program that would benefit residential and business customers.
While landfills and brownfields are seen as prime locations for solar installations, so far they account for a tiny handful of the more than 20,000 solar projects already installed in New Jersey. Five landfill solar projects are in operation and about two dozen more are either in development or being considered, according to the state Department of Environmental Protection.
PSE&G, which serves about three-fourths of New Jersey's electrical customers, currently operates a solar installation on the 1-A landfill in Kearny that can be seen by commuters on New Jersey Transit's Northeast Corridor trains. The utility leases the land from the New Jersey Meadowlands Commission, and the site generates about 3 megawatts of energy, or enough to power about 3,000 homes.
"Landfills are a better long-term strategy than using agricultural land," said Dan Berwick, director of policy and business development for San Diego-based Borrego Solar, which has built solar installations around the country. "That's one of the things that's good about PSE&G's argument: The market is not directing development there naturally. As long as PSE&G and the Board work to make sure there's a well-designed competitive program, using market forces, that's the way to get efficiency out of it."
The state Office of Rate Counsel, which represents New Jersey's utility customers, issued a strongly worded criticism to PSE&G's plan on May 9 that accused the utility of, among other things, conducting behind-the-scenes negotiations to gain preliminary approval of BPU staffers in a "parallel settlement process" that excluded some opposing views.
Among additional charges, leveled mainly at the S4A extension proposal, were that it weakens the BPU's regulatory authority over PSE&G; doesn't set spending limits for the S4A program; gives PSE&G, a regulated public entity, an unfair market advantage by allowing for guaranteed cost recovery; and doesn't adequately set criteria for competitive bidding for solar projects.
The proposal would allow PSE&G to "develop solar facilities without cost or risk, because the Company would be 'backstopped' by captive ratepayers" who will pay for the program through rate increases, according to Stefanie Brand, director of the Office of Rate Counsel. In an interview last week, Brand also noted that the value of solar subsidy credits, which the state requires utilities to buy from solar producers, has dropped lately because of oversupply, the result of a recent solar miniboom.
"There's not going to be enough credits to go around," Brand said. "But when you inject this one player who is holding $250 million worth of cards and they get to decide how it's dealt out, they're really in a position to exercise power in that market, and we're concerned with that. It's PSE&G who gets to pick the winners and losers, and it's not the market that's choosing them."
Terry Moran, PSE&G's director of solar market strategy and development, disputed the claim that PSE&G will run no risk with the landfill program and said the company will be required to file annual reports to the BPU and Rate Counsel that could be used as a basis to withhold recovery costs.
"Clearly there is a process for the Board and the Rate Counsel to weigh in on the way we will run this program and the way we will invest," he said. "We believe there are proper safeguards in place."
An average residential utility customer would see an increase of 28 cents per year initially and $4.44 by the end of the three years, PSE&G estimated in an April 26 filing to the BPU. Brand questioned those estimates and said PSE&G didn't adequately explain in its filing how it arrived at them.
Moran characterized the preliminary settlement as the product of an open process in which the Rate Counsel refused to make compromises, unlike other parties that initially opposed parts of the plan but wound up supporting it.
The BPU can approve, reject or modify PSE&G's plan, Brand said, and its decision could be appealed all the way to the state Supreme Court.