Rising heating costs put focus on subsidies

TOM JOHNSON, ENERGY/ENVIRONMENT WRITER | SEPTEMBER 15, 2022

NJ Spotlight News

With gas bills spiking by as much as $30 a month to heat homes this winter, could it push the state to explore new ways to fund the transition to clean energy?

As it stands, customers are paying those subsidies on their monthly bills. They have subsidized efforts to build a robust solar sector, electrify the transportation system and modernize the gas and electric grids. And they have been told to pay more to avert the potential closing of New Jersey’s nuclear power plants.

The cost of doing all of that has been cushioned by historically low natural-gas prices, a factor that stabilized utility rates and kept bills low. All together, those subsidies add up to more than a billion dollars. The solar sector costs ratepayers more than $500 million a year; the nuclear subsidies $300 million annually; and $30 million per year goes to provide rebates for people to buy electric vehicles. And more subsidies are likely to be added as the state boosts its solar and offshore-wind programs to transition from carbon-based power sources.

But for those programs, ratepayers would have seen their utility bills drop despite a lot of spending by the state’s gas and electric utilities, according to New Jersey Division of Rate Counsel Director Brian Lipman.

“That was all well and good while commodity prices were going down. Now commodity prices are going up,’’ Lipman said. “You are going to see significant costs for offshore wind, EVs (electric vehicles), for the infrastructure.’’

Global considerations

Natural-gas prices are unlikely to drop anytime soon due to events happening elsewhere on the globe, including the decision by Russia to cut off supplies of the fuel to western Europe after they supported Ukraine following the invasion by the former Soviet Union last March.

The jump in gas prices is likely to increase electric bills, because natural gas generally sets the wholesale price of electricity. Natural gas provides the power for more than 40% of the electricity used in New Jersey.

For consumers, it most likely means higher bills just as they are already paying more for food, gasoline and housing.

“It is going to put a lot of pressure on us to figure out how to get done all the things this administration wants to get done,’’ Lipman said. “They are important, they are needed, but there’s only so much ratepayers can pay. If commodity prices go up, it clearly cuts into money ratepayers can pay.’’

Under rate increases approved by state regulators that will take effect next month, gas bills will rise this winter by about $21 a month for New Jersey Natural Gas to $31 monthly for South Jersey Gas.

That could force the state to explore new ways of funding the programs, an option the state Board of Public Utilities is pursuing as a way of solving a lingering problem left over from the COVID-19 pandemic.

With a moratorium to prevent shutoffs of electric and gas service because of the economic slowdown caused by the pandemic, there are still 983,520 customers in arrears on their energy bills, owing more than $726 million to their utilities as of July, the latest date posted by the BPU. It reflects a 5% increase from a year ago.

Boost energy assistance

“We are still in pretty bad shape,’’ said Evelyn Liebman, an associate director for AARP of New Jersey. Liebman has called for an expansion of the state’s energy-assistance programs to address the problem.

Among possible solutions being explored by the BPU is a proposal to have the state utilities forgive a portion of what customers owe them in arrears, an option so far not endorsed by the utilities.

“On behalf of consumers, we need some level of commitment and urgency to ensure utility service is affordable,’’ Liebman said.

To Lipman, the state may need to scale back the scope of projects being pursued to advance the clean-energy agenda, although it may be difficult to slow down the clean-energy projects already moving forward.

The state also could find other ways to fund them, such as involving the private sector, which is actively seeking to get involved in the electrification of the transportation system. “Ratepayer funds are not the only way to fund all the things we want do,’’ Lipman said.

Who caused the spike?

Some critics blame misguided energy policies for creating the spike in bills.

“This is not the fault of the natural-gas utilities, but the fault of five years of bad energy policy,’’ said Mike Makarski, a member of the Affordable Energy Coalition of New Jersey. “We can’t power our society on wind, solar and batteries alone.’’

Tom Gilbert, a co-executive director of the New Jersey Conservation Foundation, argued fossil fuels like natural gas keep consumers who rely on the fuel at the mercy of big price swings.

“These significant increases of fossil fuels only make electrification more important,’’ he said, citing recent studies by the BPU and Acadia Center documenting the benefits of switching to electrification.

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published this page in News and Politics 2022-09-15 04:13:38 -0700