Under New Jersey’s restructuring law (the Act), the Board of Public Utilities (NJBPU) must undertake a "comprehensive resource analysis" to determine a funding plan for energy efficiency (EE) and renewable energy (RE) programs. The plan will determine program cost recovery, performance incentives, and which programs are funded by the "societal benefits charge" (SBC) passed on to ratepayers. Two groups have filed plans with the NJBPU for review, one headed by the BPU’s Division of Ratepayer Advocate (the DRA Plan), the other headed by the investor-owned utility Public Service Electric & Gas (PSE&G Plan).
The Act, which became effective on February 9, 1999, states that the plan’s funding must be at a minimum level of at least 40% of the total funds collected in electric and gas utility rates on the effective date of the act for demand-side management programs for a four-year period. The law further provides that twenty-five percent of the funding must be used for RE programs.
The DRA Plan proposes to create, subject to NJBPU oversight, an Independent Statewide Administrator (ISA) to administer the EE and RE programs. The DRA Plan also creates an Advisory Committee, to address items such as energy savings targets, technology market penetration targets, program design, bidding procedures, program incentive levels, performance standards, program measurement and verification protocols, and policy guidelines for renegotiating standard offer contracts. The proposed Advisory Committee would consist of representatives from entities such as the DRA, the Department of Environmental Protection, suppliers of renewable technologies and energy efficiency measures, academic institutions, public interest groups, and utilities.
Under the DRA Plan, funding for the programs would amount to $128 million annually for each of the initial four years. Of this amount, $96 million would be used for EE programs and $32 million for RE programs. The funding for RE programs would be collected exclusively from electric rates; the EE funding would be divided between gas and electric rates in proportion to the total sales revenues for each, resulting in 77% of funds being collected from electric rates, and 23% from gas rates.
All EE programs receiving SBC funding under the DRA Plan are required to function on a competitive bid basis, and negotiated contracts would not be permitted. The DRA Plan would place 45% of SBC EE funds toward "Pay-for-Savings" programs, which pay vendors on the basis of energy savings provided to their customers. Rules would be established to encourage multiple vendor participation by limiting the winning bidder funding to 50% of the funds. Another 45% of SBC EE funds would be directed toward "Pay-for-Technology" programs, which include items such as new construction funding. Another EE program the DRA Plan endorses is a "Pay-for-Infrastructure" program. This program funds research and development.
The DRA Plan also addresses SBC funding of RE programs. Under the plan, funding would not be used to support technologies already receiving market support. The DRA Plan includes within this category: projects used to meet the Act’s renewables portfolio standard, methane from landfills, and other technologies as identified by the Advisory Committee to meet this requirement. The plan further provides that renewable-fueled fuel cells should receive SBC funding, but that technologies relying on fossil fuels should have less incentives. Forty percent of RE program funds would be devoted to a project incentive program and to customer credits. In the project incentive program, project developers would respond to requests for proposals to receive funding. Eligible technologies for this program include wind turbine installations and renewable-fueled fuel cells larger than 100 kilowatts, photovoltaic projects larger than 500 kilowatts, and biomass and geothermal technologies. The customer credit program would provide customers credits for the purchase of renewable energy. Another 40% of RE program funding would be used to encourage small scale technologies. Eligible technologies include photovoltaics, solar thermal electric generation, wind turbine installations smaller than 100 kilowatts, and renewable-fueled fuel cells smaller than 100 kilowatts. Funds would be awarded on a "first come, first serve" basis, with a cap of 60% of total project costs. Fifty percent of the funding would be applied for systems of 10 kilowatts or less, 25% to systems of ten to 100 kilowatts, and 25% to systems of 100 to 500 kilowatts. The remaining 20% of RE program funds would be used for infrastructure programs, such as research and development, community education, and economic development.
The PSE&G Plan establishes a statewide funding level of $423 million over a four-year period, beginning with $70 million in 2000, $108 million in 2001, $120 million in 2002, and $125 million in 2003. During the period 2000 through 2008, 25% of all new program funds would be allocated to RE programs. Each utility is assigned a share of the funding under the PSE&G Plan. The PSE&G Plan further provides that existing programs, as well as lost revenues related to EE programs, would be recoverable in each utility’s SBC. For the period 2000 through 2003, on average each utility will allocate 17% of its total new program budget to RE programs, although this allocation may increase to 25% over the four year period. Funding also would be directed to projects such as natural gas-fired fuel cells. Electric funding would be split evenly between utility-administered programs and programs administered by an ISA. Utility-administered plans are to be implemented consistently with respect to program structure, incentive levels, marketing, quality assurance, and service. The Plan would establish collaborative consultants to evaluate the programs. The PSE&G Plan proposes that no one technology would receive more than 50% of a program’s funding and that no more than 50% of any block of funding would support systems greater than 10 kilowatts without NJBPU approval.