NJBIA Energy Policy

NJBIA, with the help of its member companies, develops policy positions to represent the business community.  Here’s some of the items we are working on to help lower your energy costs.

* Societal Benefit Charge *

Background: The Societal Benefits Charge (SBC) was part of the State’s transition to a deregulated energy marketplace in 1999.  Since utility companies used to be able to recover costs and fund infrastructure improvements as well as low income assistance in charges built into the rate structure, the State saw the SBC as a way to continue these social programs in a deregulated market as a separate line item.  It is composed of 6 charges paid by gas and electric users: 1) cost of social programs; 2) nuclear plant decommissioning costs; 3) cost of demand side management and energy efficiency as well as Class 1 renewable power such as wind, solar, fuel cells.  (This is currently being funded and managed through the Clean Energy Program, which resides within the Board of Public Utilities (BPU).  They are responsible for setting the guidelines on eligible projects, amount of funding, Energy Star Homes and Smart Start Buildings, subsidies for solar, wind, etc); 4) manufactured gas plant remediation costs 5) cost of consumer education and 6) Universal Service Fund which provides for social programs such as the Lifeline Credit Program and Low Income Home Energy Assistance Program. 

There is not one statewide calculation for the SBC. Tariffs are set during rate making procedures and vary from utility to utility. However the BPU must approve all tariffs and the Board sets the amount of increases in the surcharge for Universal Service Fund and allocations for the Clean Energy program. 

The SBC is approximately 3% of an energy bill. Reductions for business would allow for other investments. Furthermore, the ability of a company to take a credit against the SBC for onsite improvements would allow for efficiencies/renewables to be implemented thus improving the State’s energy supply while also giving a break to a company that is doing green initiatives.

* Clean Energy Funding *

The State will get a bigger bang for its buck if it funds business ratepayer projects and focuses on these installations than on residential projects. As a part of the Societal benefits charge, the Clean Energy Fund spends over $160 million a year on different projects with less than half of the money going to commercial projects.

The BPU should ensure equal treatment of the business ratepayers and the residential rate payers. Currently business rate payers do not receive the same level of benefits and incentives as residential rate payers. Because businesses use more power than residential customers, they contribute more money through the SBC. Yet, BPU guidelines limit the amount of rebates business ratepayers are eligible for in a calendar year, while there are no funding limitations for residential ratepayers.  A residential rate payer can qualify for an air conditioning rebate, lighting upgrade, a hot water heater rebate and a NJ Energy Star home rebate in the same year. Businesses meanwhile are often limited to a $100,000 maximum rebate for the entire site even though they might have upgraded equipment or installed alternative energy onsite.  Business projects cost more than residential (i.e. a HVAC system for a warehouse is going to cost more than one for a house), NJBIA believes SBC funds should be distributed more equitably between business and residential users.  In other words, a business that contributes hundreds of thousands of dollars through the SBC is obviously a large energy user and should be eligible for larger rebates than a customer who pays less than a thousand dollars a year into the fund but is eligible for unlimited amounts of rebates and incentives.

NJBIA is supporting A-4083 and A-4084 which create more equitable distribution of the funds.

* TEFA (Transitional Energy Facility Assessment) *

It’s now time to look at energy costs, and particularly its failure to eliminate the TEFA temporary energy tax enacted in 1998 as part of electric energy deregulation, where overall energy taxes were to fall from 13.5 percent to 7.5 percent.

In 2005, New Jersey industrial users paid the fourth highest electric rates in the nation and the highest in the Mid-Atlantic region, fully 58 percent above the national average. The TEFA temporary energy tax adds approximately 3-4 percent to electric energy bills, a total of $235 million. TEFA was scheduled to expire in 2002, but expiration was delayed three times, in 2001, 2004 and again last year. The phase-out of TEFA is now set to begin in January 2009, but in light of past history there is considerable and understandable skepticism the temporary tax will be ended.

There is no more significant symbolic and substantive action that can be undertaken to improve out business climate than to accelerate the TEFA phase-out so that it begins January 2008.  This action would reduce the temporary tax by 25 percent, and cost the FY 2008 State Budget $29 million. It would help offset the double digit electric rate increases recently announced by our largest electric utility and keep a promise made by the Legislature over 10 years ago.

* Cogeneration *

As part of the State’s energy portfolio, cogeneration has become an essential component. With thoughts of encouraging distributed generation, the State needs to examine its cogeneration policies. The Clean Energy fund has a CHP project fund, but this program reviews on once yearly reviews and is slow to award contracts. Furthermore, tax breaks were available for cogens that were developed prior to 1997.  These tax abatements need to be continued for cogen units that are sited today.

The State also needs to exempt from RGGI and other greenhouse gas emission reporting cogen units that are under 25 megawatts selling less than 10% of their power to the grid.