decoupling the new jersey approach: “conservation and usage adjustment”
DESCRIPTION
DECOUPLING The New Jersey Approach: “Conservation and Usage Adjustment”. Geography. Seneca Niagara Casino. Commodity Marketing. Warren County District Landfill. New York. SJG Service Area. Borgata Phase Ill. Borgata Phase II. Philadelphia. FPL Marcus Hook. Atlantic City. - PowerPoint PPT PresentationTRANSCRIPT
DECOUPLING
The New Jersey Approach:
“Conservation and Usage
Adjustment”
Atlantic CityAtlantic City
New YorkNew York
WilmingtonWilmington
Washington D.C.Washington D.C.
PhiladelphiaPhiladelphia
SJG Service Area
SJG Service Area
Seneca Niagara Casino
Seneca Niagara Casino
Borgata CasinoBorgata Casino
ACUA LandfillACUA Landfill
Warren CountyDistrict Landfill
Warren CountyDistrict Landfill
Borgata Phase IIBorgata Phase II
Mannington MillsMannington Mills
Resorts CasinoResorts Casino
GeographyGeography
CommodityMarketing
CommodityMarketing
FPLMarcus Hook
FPLMarcus Hook
ACUA LandfillPhase II & III
ACUA LandfillPhase II & III
Borgata Phase IllBorgata Phase Ill
1999 NJBPU Promotes Unbundled Rates and Customer Choice
Cost ofService Recovery
Cost ofService Recovery
Cost of GasPaid to SJG Cost of Gas
Paid to TPS
Relative Cost per Therm
SJG Sales Customer SJG TransportationCustomer
WIN - WIN - WIN
• CUSTOMERS REDUCED THEIR BILLS – BUYING GAS FROM A THIRD PARTY
• NEW JERSEY’S CUSTOMER CHOICE INITIATIVE WAS A SUCCESS
• SJG’S SHAREHOLDERS WERE NOT HARMED
Observations
• Average use per customer continues to decline as a result of:
•Customer initiated conservation measures
•Higher efficiency equipment being installed
• Lower volumes delivered or sold deteriorates utility income
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Currently
• SJG’s profitability is tied to the volume of gas that we deliver
• SJG earns less margin as customers reduce their usage
• SJG has had a disincentive to promote energy conservation
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Decoupling removes the inherent disincentive that a utility has under traditional ratemaking to promote energy conservation
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DecouplingDecouplingUnder the CUA we will help customers reduce their usage without negatively impacting the financial integrity of SJG
Under a decoupling mechanism, the utility cannot increase its earnings by
increasing its sales volumes because additional margin revenues are returned to
customers.
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Adding new customers is how we will grow SJG’s earnings in the future
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DECOUPLING MECHANISMS
• APPROVED IN:CALIFORNIA, MARYLAND, NORTH CAROLINA, OREGON
• PENDING IN:INDIANA, OHIO, NEW JERSEY
• DENIED IN:ARIZONA, ARKANSAS, GEORGIA, WASHINGTON
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Inside SJG’s “CUA” Proposal
• Conservation and Usage Adjustment (CUA) is an expansion of the margin recovery mechanism embodied in SJG’s Temperature Adjustment Clause (TAC)
• CUA rate adjustments can either increase or decrease a customer’s bill
• Rate adjustment based on change in average use per customer applied against unit margins by class
• SJG will launch new conservation and energy efficiency programs
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Cost PerTherm$1.65
BGSS
State Charges
Taxes
Cost of ServiceState Charges2% or $0.0314
Taxes15% or $0.2412
BGSS72% or $1.1924
Cost of Service11% or $0.1808
New Jersey, Customer and Company Benefits
• Eliminates SJG’s disincentives to promote energy conservation
• Removes the relationship between our sales volumes and profits
• Provides increased opportunities to customers to reduce gas consumption, as a result of aggressive conservation initiatives promoted by SJG
• Improves SJG’s ability to recover its fixed costs of providing service
• Customers’ bills will more closely reflect the margin recovery amounts approved by the NJBPU in our last rate case
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THE NEW JERSEY APPROACH
TO DECOUPLING
Conservation and Usage AdjustmentConservation and Usage AdjustmentConservation and Usage AdjustmentConservation and Usage Adjustment
THE NEW JERSEY APPROACH
TO DECOUPLING
STAY TUNED…
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PIPELINE INTEGRITY
MANAGEMENT REGULATIONS
South JerseySouth JerseyGasGas
South JerseySouth JerseyGasGasProposed Rate ProgramProposed Rate Program