A6123

An Act concerning public utility ratemaking practices, designated as the Public Utility Rate Stabilization Act, and supplementing Title 48 of the Revised Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. As used in P.L. , c. (C. ) (pending before the Legislature as this bill):

“Alternative ratemaking mechanism” means a ratemaking mechanism in an alternative ratemaking plan and may include, but is not limited to, a performance-based rate, a formula rate, a multi-year rate plan, an earnings-sharing mechanism, a decoupling mechanism, or any other ratemaking mechanism authorized by the board.

“Alternative ratemaking plan” means a plan that implements one or more alternative ratemaking mechanisms to be used in addition to or in place of the ratemaking process established pursuant to R.S.48:2-21, R.S.48:2-21.1, or any other provision of law, rules, regulations, or orders.

“Base rate case” means an open, public hearing before the board to consider a filing by a gas public utility or an electric public utility for a change in base rates, which includes an analysis of the gas public utility’s or electric public utility’s income statement and balance sheet for the purpose of determining the level of revenues necessary to afford the gas public utility or electric public utility an opportunity to earn a fair and reasonable rate of return on prudently-incurred capital investment in the gas public utility’s or electric public utility’s rate base.

“Board” means the New Jersey Board of Public Utilities or any successor agency.

“Customer” means any residential, commercial, or industrial customer who receives gas public utility service from a gas public utility or electric public utility service from an electric public utility.

“Deadband” means a range, to be determined by the board and measured in basis points above the return on equity authorized by the board as part of any earnings-sharing mechanism that is included within an alternative ratemaking plan approved by the board, wherein earnings within the range shall be retained by a gas public utility or an electric public utility, as appropriate, but earnings in excess of the range shall be subject to an earnings-sharing mechanism.

“Decoupling mechanism” means a mechanism that disassociates, as appropriate, a gas public utility’s or an electric public utility’s financial performance and results from the quantities of gas or electricity sold or delivered by the gas public utility or electric public utility.

“Earnings-sharing mechanism” means a mechanism that requires a gas public utility or an electric public utility to share earnings in excess of its return on equity, as authorized by the board in any alternative ratemaking plan, with the gas public utility’s or electric public utility’s customers, and shall include, but not be limited to, a deadband.

“Electric public utility” means a public utility, as that term is defined pursuant to R.S.48:2-13, that transmits and distributes electricity to end users within the State.

“Formula rate” means a rate that is periodically adjusted based on a predetermined formula approved by the board without the need for a gas public utility or an electric public utility to file a base rate case with the board.

“Fully-projected future test year” means a 12-month period beginning no later than 12 months after the date of an applicable filing by a gas public utility or an electric public utility, which filing reflects the anticipated costs, investments, and revenues reasonably expected by the gas public utility or electric public utility to occur during that period.

“Gas public utility” means a public utility, as that term is defined pursuant to R.S.48:2-13, that distributes gas to end users within the State.

“Multi-year rate plan” means a rate mechanism under which the board sets rates and revenue requirements for a multi-year plan period of at least 36 months. “Multi-year rate plan” includes, but is not limited to, a plan that authorizes periodic changes in rates without the filing of a base rate case by a gas public utility or an electric public utility or the board’s entry of an order resolving the gas public utility’s or electric public utility’s base rate case, which periodic changes include, but are not limited to, adjustments to account for inflation or capital investments.

“Performance-based rate” means a rate that is set or adjusted based on the performance of a gas public utility or an electric public utility, as determined by performance metrics that may be established by the board.

2. Notwithstanding any other law, rule, regulation, or order to the contrary, a gas public utility or an electric public utility may utilize a fully-projected future test year to:

a. determine rate bases, revenues, expenses, or other items as part of a base rate case filed by a gas public utility or an electric public utility, as appropriate, with the board;

b. petition the board for the approval of an alternative ratemaking plan pursuant to subsection a. of section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill); and

c. fulfill any other purpose, as determined by the board.

3. a. No later than 180 days after the enactment of P.L. , c. (C. ) (pending before the Legislature as this bill), the board shall adopt rules and regulations, pursuant to the “Administrative Procedure Act,” P.L.1968, c.410 (C.52:14B-1 et seq.), necessary to effectuate the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill).

b. At a minimum, the rules and regulations adopted by the board pursuant to subsection a. of this section shall:

(1) prescribe the information that a gas public utility or an electric public utility shall provide when utilizing a fully-projected future test year pursuant to section 2 of P.L. , c. (C. ) (pending before the Legislature as this bill);

(2) prescribe the information that shall be included in a gas public utility’s or an electric public utility’s petition for an alternative ratemaking plan;

(3) specify the circumstances under which a gas public utility or an electric public utility, for which the board has approved an alternative ratemaking plan, shall be required to file a base rate case, which may include, but shall not be limited to, the period of time within which a gas public utility or an electric public utility would be required to file a base rate case following the board’s approval of the gas public utility’s or electric public utility’s alternative ratemaking plan;

(4) require a gas public utility or an electric public utility, for which the board has approved an alternative ratemaking plan, to keep or cause to be kept any information and records deemed relevant by the board; and

(5) establish evaluation criteria for an alternative ratemaking plan for a gas public utility or an electric public utility, as appropriate, which criteria may include, but shall not be limited to, whether the alternative ratemaking plan:

(a) provides for just and reasonable rates;

(b) aligns an economically-viable utility model with the State’s public policy goals;

(c) fosters Statewide improvements to the economic and operational efficiency of the gas distribution system or electrical grid;

(d) furthers the public interest, which shall include, but not be limited to, the promotion of safe, adequate, and proper service to the customers of the gas public utility or electric public utility;

(e) enhances the reliability, resilience, and security of the gas distribution system or electrical grid;

(f) facilitates the development of innovative gas public utility services, including, but not limited to, renewable natural gas, hydrogen, or other low- to zero-carbon fuels;

(g) balances the interests of the gas public utility’s or electric public utility’s customers and shareholders by providing services that the gas public utility’s or electric public utility’s customers want while preserving reasonable shareholder value; and

(h) specifies the time period to which the alternative ratemaking plan applies.

4. a. On or after the date on which the board adopts rules and regulations pursuant to section 3 of P.L. , c. (C. ) (pending before the Legislature as this bill), a gas public utility or an electric public utility may petition the board to establish an alternative ratemaking plan.

b. The board shall approve without modifications, approve with modifications, or deny a petition submitted pursuant to subsection a. of this section not later than nine months after a gas public utility or an electric public utility files its petition with the board.

c. The board shall hold a public hearing and provide opportunity for comments from the public before approving without modifications, approving with modifications, or denying a petition submitted pursuant to subsection a. of this section.

d. The board shall not approve a petition submitted pursuant to subsection a. of this section unless the board determines that the alternative ratemaking plan satisfies the criteria established by the board pursuant to paragraph (5) of subsection b. of section 3 of P.L. , c. (C. ) (pending before the Legislature as this bill).

e. If the board approves a petition for an alternative ratemaking plan with modifications pursuant to subsection b. of this section:

(1) the gas public utility or electric public utility may accept or reject the modified alternative ratemaking plan by filing a notice with the board not later than 30 days after the date on which the board issues an order approving the petition with modifications; and

(2) if a gas public utility or an electric public utility files a notice to reject the modified alternative ratemaking plan, the alternative ratemaking plan shall be deemed withdrawn, and the rates that were in effect before the modified alternative ratemaking plan was approved shall remain in effect until changed or modified by the board.

5. This act shall take effect immediately.

STATEMENT

This bill, to be known as the “Public Utility Rate Stabilization Act,” permits gas public utilities and electric public utilities (utilities) to employ alternative ratemaking mechanisms, which include, but are not limited to, performance-based rates, formula rates, multi-year rate plans, earnings-sharing mechanisms, decoupling mechanisms, and other ratemaking mechanisms authorized by the Board of Public Utilities (board). A utility is required to submit a petition to the board for approval of an alternative ratemaking plan prior to employing an alternative ratemaking mechanism.

Within 180 days of the bill’s enactment, the board is required to adopt rules and regulations to effectuate the bill, including, but not limited to, rules and regulations establishing certain evaluation criteria to assist the board in determining whether to approve without modifications, approve with modifications, or deny an alternative ratemaking plan submitted by a utility. The bill requires the board to make its determination regarding an alternative ratemaking plan within nine months of the plan’s submission. The board is also required to hold a public hearing and provide opportunity for public comments prior to making its determination regarding an alternative ratemaking plan.

If the board approves an alternative ratemaking plan with modifications, the utility is to accept or reject the modified plan by filing a notice within 30 days of the date on which the board issued its order containing the board’s determination regarding the plan. Under the bill, if the utility files a notice rejecting the modified plan, such plan is to be considered withdrawn and the rates that were in effect prior to the plan’s submission are to remain in effect until changed or modified by the board.

In addition, the bill permits utilities to use fully-projected future test years to: (1) determine rate bases, revenues, expenses, or other items as part of a utility’s base rate case; (2) petition the board for the approval of an alternative ratemaking plan; and (3) fulfill any other purpose, as determined by the board.