Tens of millions of dollars on the line as third-party suppliers dispute Board of Public Utilities’ order not to increase fixed rate during the term of contracts
Tom Johnson reports for NJ Spotlight:
Credit: James Moran/Flickr
In a dispute arising out of the state’s new clean-energy law, independent energy suppliers have been ordered to stop passing on higher costs to customers as a result of expanded requirements to supply solar energy.
The New Jersey Board of Utilities ordered so-called third-party suppliers to halt the practice and to refund customers, a step that could run into tens of millions of dollars, according to representatives of the Retail Energy Supply Association, which is contesting the order.
The issue involves only customers who have switched from their incumbent electric utility to third-party suppliers with fixed-price contracts. The board’s staff warned increasing the fixed rate during the term of a contract is prohibited by energy competition rules adopted by the agency.
But the suppliers counter that the new energy law includes a provision recognizing the added solar purchase requirements reflect a change in law, allowing price increases to pass on the obligations to existing customer contracts.
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“The conclusion that suppliers must ‘cease and desist’ from passing through increased charges due to the CEA (Clean Energy Law) appears to be based on the flawed reasoning that comments from the board staff override a statute that was subsequently enacted by the Senate and General Assembly of the state of New Jersey and signed into law by the Governor on May 23, 2018,’’ according to a brief filed by the suppliers’ association.
A question of fairness
The price increases across all the energy suppliers could amount to as much as $70 million or more, according to Robert Gibbs, director of corporate and regulatory affairs for Direct Energy, one of the largest retail energy suppliers in the state. “It wouldn’t be fair for us to eat those costs,’’ he said.
The BPU declined to comment on the matter since it is pending before the agency and will be dealt with at an upcoming agenda meeting, according to Peter Peretzman, a spokesman for the board.
In its letter in late January ordering suppliers to stop passing on the costs, however, it acknowledged the likelihood that the energy companies would like to pass on costs to customers to recoup those costs.
“However, for many customers, this would defeat the purpose of a fixed price contract,’’ the board contended. “Customers who choose fixed price contracts do so in order to avoid price risk.’’
