New Jersey Deregulation


Some states decided to deregulate its energy market to allow consumers a choice in their supplier of electricity. More recently, since suppliers have recently been able to do their billing in conjunction with the utility, there are now many Retail Electric Suppliers (RES) providing less expensive and greener electricity alternatives for residents and businesses. Customers can still choose to receive their electric supply from the utility or from one of these new alternative suppliers. Suppliers are often able to offer lower rates because they're able to buy electricity more frequently than the utility, and they can better estimate the amount to purchase because they have fewer customers than the much larger utilities.

If you're an New Jersey resident, you've probably noticed that your electric bills are broken down into two main parts. One is supply (where your electricity originates) and the other is distribution (how it arrives to your home, via the physical power lines). If you "switch" your electricity through Power2Switch, you are simply replacing one supplier with another. Distribution will always be handled by a New Jersey utility company so there is never an interruption in service when you switch in New Jersey. It can be confusing to sort through all of the suppliers and plan options, and that's where we can really help. Power2Switch enables you to compare electricity providers, choose the best plan for your situation, and easily make the switch through our site.

Deregulation Timeline

02/08:  The New Jersey Board of Public Utilities approved the results of the state's seventh annual electricity auctions for Basic Generation Service. This year, the value of the fixed price auction was approximately $7.0 billion over three years. The prices obtained in this year's fixed price auction are higher than those obtained last year, primarily because of increased fuel and capacity costs for the upcoming three-year supply period that were factored into the bidders' prices. The electricity supplies auctioned this year will replace supplies auctioned in 2005, which were priced significantly lower. The combination of these two factors will result in an increase in overall electric bills, ranging from 10.5 % for a typical residential or small business customer in JCP&L's service area to 17.3 % for one in Rockland Electric's service area. The new rates are effective for service rendered on and after June 1, 2008.
Source:  New Jersey Board of Public Utilities

02/06:  The outcome of New Jersey's 5th Electric Auction for basic generation service resulted in prices that were more than fifty percent higher than last year's auction at this time.  The contracts secured through this auction process would service about one third of the power supply for utilities who participate in the basic generation service.
Source:  New Jersey Board of Public Utilities

09/02:  Under the Electric Discount and Energy Competition Act (EDECA), rates were capped during the 4 year transition period that ended August 1, 2003. According to a New Jersey Board of Public Utilities' (BPU) press release, BPU hired two consulting firms to audit the deferred balance accounts of Conectiv, Jersey Central Power & Light, Public Service Electric & Gas, and Rockland Electric. "If the market price of electricity exceeds the rate caps, EDECA permits an electric utility to recover the difference or deferred costs, provided they were incurred in a prudent and reasonable manner." The utilities stated that they had "nearly $1 billion in deferred electric utility balances."

09/02:  Senate Bill 869 was enacted on September 9, 2002. SB 869 gives the Board of Public Utilities the discretionary power to allow the utilities to issue "transition bonds." These bonds would allow Conectiv, Jersey Central Power & Light, Public Service Electric & Gas and Rockland Electric to recover nearly $1 Billion in "deferred balances" as a result of the rate cap. The Board had hired two consulting firms to audit the four utilities.

08/02:  On August 30, 2002, the Deferred Balances Task Force released its report and appendices to Governor McGreevey, who established the task force with his Executive Order on July 31, 2002. The report explained that the four-year rate caps had caused the enormous deferred balances. Under New Jersey's restructuring legislation, ratepayers were required to repay "reasonably incurred deferred balances." The task force made five recommendations: "sign Senate Bill 869;" "apply strong consumer protections;" "aggressively mitigate further accumulation of deferred balance;" "mandate bill inserts on educate consumers about deferred balances;" and "examine boarder changes in EDECA," New Jersey's restructuring legislation, "and its implementation."

09/01:  The latest of scheduled rate reductions under New Jersey's law that restructured the electric power industry took effect for customers of PSE&G and GPU Energy. With the original reduction of 5 percent in August 1999, these reductions bring the total reductions to 9 percent for PSE&G customers and 8 percent for GPU customers. By 2003, rate reductions totaling 15 percent were scheduled for all New Jersey customers.

01/01:  As a result of the restructuring legislation, customers of PSE&G would receive a 2-percent rate reduction. The reduction was the result of PSE&G's sale of $2.525 billion in securitization bonds. The law required the savings from the bonds to be passed on to PSE&G's customers. Customers received a 5-percent rate reduction in August 1999 and are scheduled for further reductions of 2 percent in August 2001 and 5 percent in August 2002.

12/00:  The New Jersey Supreme Court upheld a decision upholding the New Jersey Board of Public Utilities' (BPU) restructuring and securitization orders for PSE&G. The decision would allow PSE&G to go forward with its implementing restructuring according to the orders issued by the BPU. Customers would receive an additional 2 percent rate reduction and securitization bonds would be sold, amounting to $2.5 billion, the proceeds of which would retire outstanding debt and/or equity.

08/00:  Public Service Electric and Gas (PSE&G) transferred about 10,200 MW of its electric generating facilities to PSEG Power, LLC, an unregulated power generation affiliate. The transfer was executed in compliance with a one-year time frame mandated by the BPU in its restructuring orders for the utility. The assets were transferred at $2.443 billion.

08/00:  As of August 1, the 1-year anniversary of the start of customer choice in New Jersey, the Board of Public Utilities (BPU) reported that 73,133 of the State's 3.1 million residential customers have switched suppliers. About 410,886 commercial and industrial consumers had switched suppliers. At the time, approximately 13.5 percent of the power load in the State was supplied by alternative retail suppliers.

03/00:  In New Jersey, 48,000 residential customers and 19,000 businesses representing about 12 percent of the load, had switched electricity suppliers according the BPU.

03/00:  About 2 percent of the retail market in New Jersey had taken advantage of retail choice and switched their electricity suppliers, including over 50,000 residential consumers. All consumers in the State received a 5 percent rate reduction at the onset of retail choice. Some of those who had switched were seeing reductions of up to 10 percent over last year's rates.

12/99:  Due to procedural delays, New Jersey consumers did not start receiving power from their suppliers of choice until November 14, 1999. Legislation was passed in February 1999, allowing retail choice for all consumers on August 1, 1999.

08/99:  Retail rates were reduced 5 percent on August 1, 1999 as required by restructuring legislation. Further rate reductions were scheduled to increase to 10 percent.

07/99:  The BPU reached a final settlement agreement with Conectiv. The final plan set a schedule for rate reductions, determined stranded costs recovery and shopping credits, and scheduled retail access implementation for November 1999.

07/99:  Conectiv had received final approval from the BPU for its restructuring plan. The plan would give consumers retail choice by November 14, 1999, as the BPU had extended the date for delivery of power from alternative suppliers to allow utilities more time to get their computer systems ready for the change. Rates were scheduled to be cut by 5 percent on August 1, 1999, increase to 7 percent on January 1, 2001, and increase to 10.2 percent on August 1, 2002. Conectiv's distribution rate would be 2.1384 cents/kWh. The company was allowed $800 million in stranded costs recovery. Shopping credits, the rates which outside suppliers must compete, were set: residential credits would be 5.65 cents/kWh in 1999, 5.7 in 2000, 5.75 in 2001, 5.8 in 2002, and increase to 5.85 in 2003; commercial rates would begin at 5.18 cents/kWh and eventually increase to 5.7 cents; industrial rates ranged from 4.95 cents/kWh and went up to 5.65, depending on voltage and time-of-day usage.

06/99:  GPU's restructuring plan for offering customers retail choice as of August 1, 1999, was accepted by the BPU. The settlement included rate reductions in addition to the 5 percent due August 1 as required by the restructuring legislation. Customers of GPU subsidiary Jersey Central Power & Light would also receive another 1 percent reduction in 2000, 2 percent in 2001, and 3 percent in 2002. Average shopping credits (actual credits depend on consumer class) were increased to 5.13 cents/kWh for August 1999, 5.27 cents in 2000, 5.31 cents in 2001, 5.36 cents in 2002, and 5.40 cents in 2003. GPU would be allowed to recover $400 million in stranded costs. Originally they asked for $525 million.

03/99:  New Jersey planned to launch its consumer education for electricity restructuring and retail choice program on June 1, 1999.

03/99:  Public Service Electric & Gas proposed a deregulation plan to the BPU that would determine how PSE&G would operate in a deregulated environment, which was scheduled to begin in New Jersey on August 1, 1999.

02/99:  Legislation (Assembly Bill 10/Senate Bill 5) to restructure the electric power industry in New Jersey was enacted. The law allowed all consumers to shop for their electric supplier by August 1999; reduced current rates by 5 percent, and over the next 4 years, by 10 percent; and allowed recovery of utilities' stranded costs through a wires charge paid by consumers.

10/98:  Jersey Central Power & Light began a pilot program in September 1997 for customers in the Monroe Township.

08/98:  In a ruling on PSE&G's restructuring plan, an Administrative Law Judge stated that PSE&G should recover from ratepayers most of its stranded costs and would have to cut rates by 10-12 percent. Another ALJ issued an initial decision on Atlantic City Electric Co.'s stranded costs and unbundling filings agreeing that stranded cost estimates were acceptable and should be recovered. Legislative and BPU approval were scheduled in order to implement the utility restructuring plans.

05/98:  The BPU announced a 6-month delay in its plan to offer retail competition. Because of this, phase-in of retail competition would be scheduled for April 1999.

07/97:  Assembly Bill 2825, a tax reform bill, was enacted. The law abolished the gross receipts and franchise tax on sales of electricity and replaces it with a corporate business tax paid by the utilities and a 6 percent sales and use tax paid by the customers on energy use. The new tax system would create tax equity between utility companies and potential competitors in a deregulated market.

07/97:  Utilities submitted filings for stranded cost recovery. A PSE&G plan estimated $3.9 billion in stranded costs and included recovery of $2.5 billion through securitization; GPU estimated stranded costs at $1.8 billion. An initial decision by the BPU was scheduled to be due by May 1998.

04/97:  The BPU issued an order adopting and releasing its final report for the Energy Master Plan. The revised plan accelerated the time line for retail competition to begin: phase-in should have begun with 10 percent by October 1998, 35 percent by April 1999, 50 percent by October 1999, 75 percent by April 2000, and all by July 2000.

04/97:  The Energy Master Plan allowed for the potential recovery of stranded costs, but did not guarantee it. Securitization was also being considered at the time.

01/97:  The BPU issued an order releasing its Energy Master Plan for public comment. The proposal called for a phase-in of retail choice that would give all New Jersey residents and businesses the option of choosing their electricity supplier by April 2001.