RESA Welcomes Legislation Reforming Default Electricity Service in New Jersey

January 9, 2014

New Jersey

Reforms Will Ensure Robust, Sustainable Competitive Retail Electricity Market Providing Value and Choice for New Jersey Customers

The Retail Energy Supply Association (RESA) today applauded New Jersey State Assemblyman Upendra Chivukula for introducing legislation (A-4552) that will enact important reforms in how default electricity service is determined for New Jersey consumers.

The bill would enact changes in New Jersey’s Basic Generation Service (BGS) auction to increase opportunities for customers to choose among competitive energy suppliers and products compatible with their needs. The measure would expand the scope of commercial customers eligible for hourly priced real-time pricing while replacing the three-year, blended average of annual auction prices for fixed-price customers with quarterly priced default service.

“A-4552 is critical to the future growth of New Jersey’s competitive retail energy market and consumers’ ability to exercise a choice for energy products that provide value and meet their specific needs,” Jay Kooper, RESA’s New Jersey state chairman, said today in testimony before the Assembly Telecommunications and Utilities Committee.

“The lack of market-reflective pricing in a default service structure or, put another way, a default service based on a highly artificial pricing structure that bears no relation to current market prices, is a significant barrier to sustainable competition,” Kooper said.

According to the New Jersey Board of Public Utilities’ switching statistics, as of October 2013, competitive retail energy suppliers provided more than 56 percent of the electricity consumed by small commercial customers and nearly 19 percent of the electricity consumed by residential customers. Those customers that do not elect to purchase their electricity needs competitively receive default service, provided by their traditional utility company.

Commercial and industrial customers – those with a peak demand or 500 kilowatts or more – receive default service that is priced hourly and changes according to fluctuations in the prevailing market price. Those commercial and residential customers with a peak demand of less than 500 kilowatts receive a fixed price default service. The fixed price is determined by the annual BGS auction, averaged over the past three years of the auction results.

This has led to “boom and bust” cycles over the past 15 years as default service has been artificially priced below prevailing market rates (bust) or artificially higher than prevailing market rates (boom). A-4552 will correct that boom-and-bust cycle by providing for a three-year transition to default service determined by quarterly auctions every three months for commercial customers below 500 kW and an annual fixed price determined by annual auctions for residential customers. It also will lower the threshold for commercial default service to 400 kilowatts peak demand in 2014, and then drop the threshold to 250 kW in 2016. The bill also provides for non-recourse purchase of receivables statewide, a measure that will help attract more suppliers to New Jersey’s competitive retail energy market. The bill further would require utilities to provide the BPU with adequate and accurate forward-looking price comparison information to enable informed customer decisions when purchasing electric or gas service.                 

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About RESA

RESA represents competitive energy suppliers dedicated to creating and sustaining vibrantly competitive electricity and natural gas markets for the benefit of consumers.  RESA’s members include:  AEP Energy, Inc.; Champion Energy Services, LLC; ConEdison Solutions; Constellation NewEnergy, Inc.; Direct Energy Services, LLC; GDF SUEZ Energy Resources NA, Inc.; Homefield Energy; IDT Energy, Inc.; Integrys Energy Services, Inc.; Just Energy; Liberty Power; MC Squared Energy Services, LLC; Mint Energy, LLC; NextEra Energy Services; Noble Americas Energy Solutions LLC; NRG, Inc.; PPL EnergyPlus, LLC; Stream Energy; TransCanada Power Marketing Ltd. and TriEagle Energy, L.P.  For more information about RESA please contact Tracy McCormick, Executive Director, at (717) 566-5405, or visit www.resausa.org.

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About RESA

Together with our members, we play a critical role in educating key stakeholders and are active in support of or opposition to bills that affect competitive electricity markets, consumers, and RESA initiated legislation.

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