With PSE&G’s new $1B efficiency program, New Jersey takes early steps toward new utility business model

With PSE&G's new $1B efficiency program, New Jersey takes early steps toward new utility business model

The image by Ken Lund is licensed under CC BY-SA 2.0 Dive Brief:

Public Service Electric & Gas Co. received approval on Wednesday for its $1 billion energy efficiency program, New Jersey’s first efficiency plan to incorporate new rules intended to move electric utilities toward a service-based model. The program is part of the state’s larger regulatory push to significantly reduce carbon dioxide emissions as laid out by the 2018 Clean Energy Act.

Described by a PSE&G statement as the "centerpiece" of the utility’s Clean Energy Future proposal, the efficiency program represents a shift in the utility business model for New Jersey because the profits PSE&G can gain from the program will come from performing efficiency work rather than selling electricity, according to the Energy Efficiency Alliance of New Jersey, a trade association for the energy efficiency industry in the state.

PSE&G had originally proposed a much more ambitious, $2.8 billion efficiency program that would have unfolded over six years, but a settlement agreement between the utility and various groups reduced the program to $1 billion and a three year timeframe so that PSE&G’s efficiency plans do not conflict with new efficiency targets that New Jersey regulators are developing under the Energy Efficiency and Peak Demand Reduction framework created earlier this year .

Dive Insight:

PSE&G’s program is the first approved under this new framework developed by the New Jersey Board of Public Utilities (BPU).

The June order creating the framework "laid the groundwork" for a performance-based cost recovery approach for utility regulation, according to a statement from the Energy Efficiency Alliance of New Jersey. "Decoupling profits from energy sales will lead to a major shift in how utilities look at making money," Erin Cosgrove, director of regulatory affairs for the alliance, said in the statement. The BPU is still developing more comprehensive utility cost recovery and efficiency plans.

Energy efficiency growth, an area where New Jersey lags behind other states according to a recent scorecard from the American Council for an Energy-Efficient Economy, is just one plank of New Jersey’s efforts to meet a goal of 100% clean energy by 2050.

Another focus is the electrification of the transportation sector, and on Wednesday, the regulatory body also approved a plan for the build-out of publicly accessible EV charging stations. Under the order , New Jersey utilities must file plans for building light-duty EV infrastructure by Feb. 28, 2021.

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