July
1, 2002
BY
HAND
Hon.
Kristi Izzo, Secretary
New Jersey Board of Public Utilities
Two Gateway Center - 8th Floor
Newark, New Jersey 07102
Re: I/M/O Provision of Basic Generation
Service (“BGS”)
Pursuant to the Electric Discount and Energy Competition
Act, N.J.S.A. 48:3-57
BPU Docket Number: EX01110754
Dear
Secretary Izzo:
Please accept this filing submitted on behalf of the Division of the Ratepayer
Advocate (“Ratepayer Advocate”) pursuant to the procedural schedule set
forth by the Board in its Order, dated June 6, 2002.
At this juncture, the Ratepayer Advocate presents principles and
approaches, which we believe should guide the Board in assessing the detailed
BGS proposals presented by marketers, wholesale suppliers, utilities, and other
parties. The Ratepayer Advocate’s
recommended principles and
approaches for BGS service are found in the enclosed comments. We have also
presented our comments in the guideline-format set forth in the Board’s Order.
Over three years have elapsed since the Electric Discount and Energy
Competition Act (“EDECA”) was signed into law.
The EDECA changed the way that electric service is provided to ratepayers
in our State. Previously, for
over ninety years, electric service was provided by regulated electric utilities
as a bundled package of distribution service, transmission service, and
generation service. The EDECA
unbundled those components of traditional service and provided ratepayers with
the ability to choose their supplier for generation service.
Although New Jersey’s ratepayers now have the ability to choose their
generation or energy supplier, for various reasons few have
In order for the full benefits of EDECA to be realized, a competitive market for generation services must develop. Some proponents of competition argue that the transition to a fully competitive market should be accelerated, and that BGS should be used as a mechanism to accelerate that transition. While we recognize and understand their arguments, we believe that the ultimate success of energy competition depends upon a smooth transition from bundled utility services to a competitive generation market.
Since so many New Jersey ratepayers rely on BGS for their energy needs, the Ratepayer Advocate believes that BGS plays an important role in the transition process. BGS should provide a safe harbor for residential and small commercial customers who are not ready to jump into the competitive market at this time.
From the perspective of ratepayers, BGS service should be simple to understand and should provide a measure of protection against price volatility. However, as discussed more fully in our comments, incremental steps may be taken to reformulate BGS to ease the transition to competitive markets. For example, residential and small commercial customers should pay seasonal rates determined by the cost of BGS supply acquired at multi-month auctions. On the other hand, BGS for large sophisticated energy users should be moved towards real-time pricing, with an option for utility-facilitated hedging against future price changes. To acquaint ratepayers with the concept of alternative energy suppliers, branding should be introduced on customer bills for BGS service. We believe that these and other design principles set forth in our detailed comments, which are sensitive to the needs of the State’s ratepayers, will ease the transition to a competitive market.
The Ratepayer Advocate intends to review the proposals submitted by all the parties and subsequently provide the Board with more detailed comments, in accordance with the Board’s procedural schedule. Furthermore, the Ratepayer Advocate intends to work with Board Staff and other interested parties in this process.
Respectfully
Submitted,
Seema M. Singh, Esq.
Acting Director and Ratepayer Advocate
Deputy Ratepayer Advocate
encl.
c:
Honorable Jeanne M. Fox, President (by
hand delivery)
Honorable Frederick Butler, Commissioner (by hand delivery)
Honorable Carol Murphy, Commissioner (by hand
delivery)
Honorable Connie O. Hughes, Commissioner (by
hand delivery)
Lance
Miller, Chief of Staff
Suzanne
Patnaude, Chief Counsel
Service
List