PSE&G Proposes To Lower Winter Residential Natural Gas Bills, Raise Delivery Charges

Company files for modest increases in electric and gas delivery charges to take effect next year

(Newark, NJ – May 29, 2009) Citing the continuing decrease in the wholesale cost of natural gas, PSE&G has proposed to lower residential gas bills this fall by about 7 percent, or about $10 per winter month for a residential gas customer using 100 therms. The company’s annual filing with the New Jersey Board of Public Utilities will result in the third bill decrease since January 1, 2009, for a total reduction of 18 percent, or $30, since October 2008.

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While gas supply prices have been dropping, the utility said its costs to deliver natural gas and electricity have increased since base rates were last set in November 2006. Today PSE&G also filed with state regulators for a base rate adjustment that would increase electric revenue by a modest 1.9 percent and gas revenue by 2.9 percent. If approved by the BPU, the base rate increases would amount to an additional $230.6 million in annual revenue. The company has requested that the new rates take effect in March 2010.

Revenues from base rates are used to maintain and improve the electric and gas delivery infrastructure, such as pipes and wires, and provide customer services. Customer bills also contain separate charges for the electric and gas supply, or commodity, that is obtained by PSE&G on behalf of its customers.

“Lower gas supply costs are certainly one of the silver linings for our customers in this tough economy,” said Ralph LaRossa, PSE&G president and COO. “We’re pleased to pass along these savings to our gas customers for the upcoming winter. At the same time, however, our current electric and gas delivery rates do not reflect the substantial capital investments we have made to maintain safe, highly reliable service.”

Since November 2006, LaRossa said, PSE&G customers have benefited from nearly $453 million in electric system investments and more than $350 million in gas system enhancements. In addition, the higher cost of capital, increased employee expenses associated with a labor-intensive business, and the faltering economy are straining company revenues.

“We need to recover those costs to continue to provide the high level of reliable service customers have come to expect,” LaRossa said. “I understand that raising rates, even by modest amounts, is very difficult for our customers in this challenging economy. PSE&G employees are aggressively reducing business expenses. Yet those actions are not enough to make up this revenue shortfall.”

Impact of proposed electric and gas delivery rate increases

If approved by the BPU, the new base rates would increase the bill of the average residential electric customer, using 7,300 kilowatthours on an annual basis, by 3.6 percent, or $49 per year.

The residential gas customer who uses 606 therms on an annual basis would pay 5.0 percent more per year. This customer’s bill for 100 therms of natural gas in a winter month would increase by $6.40 per month to $154.57, or about 4.3 percent.

Impact of gas supply rate decrease

Under the proposed new gas supply rates, the residential gas heating customer who uses 100 therms in a winter month would see a decrease of $62 on an annual basis. This customer’s monthly winter bill would be $137.85, or $10.27 less.

“The proposed increase in residential gas bills from the base rate case would be largely offset by the 7 percent reduction we are expecting to implement this fall,” LaRossa noted. “When both rate changes are taken into effect, the gas customer’s 100 therm bill would be $145 per month, which is about the same as it was in November 2006.”

As natural gas prices dropped this past winter, PSE&G lowered gas bills by 5 percent on January 1 and another 7 percent on March 1. PSE&G makes no profit on the sale of natural gas and passes along what it pays to customers. If the price of natural gas increases, the New Jersey Board of Public Utilities allows the state’s natural gas utilities, including PSE&G, to recover those costs. Conversely, reductions in the gas supply price may be implemented at any time if market conditions warrant.

Source: Public Service Electric and Gas Company (PSE&G)