A Look at Five Fees That Might Baffle Customers
There has been a lot of talk of late about the sudden and dramatic increases in many people’s electricity bills in South Jersey. Atlantic City Electric, one of four designated distribution utilities in New Jersey, has been singled out for having the highest overall rates in the state.
Politicians are holding hearings. Customer backlash is growing. Amid it all, utilities, regulators, state officials and even multistate grid operators paint different pictures of a complex web of rates, fees, auctions and clean-energy goals.
With all this whirling in the air, a customer recently received a monthly bill for a 29-day period from Aug. 29 to Sept. 26. It was higher than expected, but that has been par for the course each month for the last several.
There was a supply charge that consisted of two components. The most obvious was the charge for basic generation of electricity. This is a rate that has been rising rapidly as demand for electricity outstrips supply, creating higher rates.
There was another change included with supply, and that was for transmission. This charge has nothing to do with the wires that may bring electricity to a home. This is a charge for the movement of electricity from its generation point through very high voltage lines to points where it can be made ready for delivery to a customer.
Another area of expense in the bill is listed as delivery, the cost of bringing power directly to a home so the lights come on when the switch is flipped. However, on the August-September bill, typical of what most residential customers see, almost 30% of the delivery charge has nothing to do with delivery. In fact it is made up of five different fees with names that make understanding what the customer is paying for difficult.
When added, the five fees together amounted to 13% of the total bill – not an insignificant amount. A ratepayer may disagree with the charges for supply, transmission and distribution, but these charges are generally recognizable; they have a role to play in moving electricity from its source to the TV set. The extra 13% is baffling.
What follows is an overview of what each of the five fees is for and how it is set.
Customer Charge
The first of the five charges is a fee just for being a customer of Atlantic City Electric. No one in the service area has a choice about being their customer; all must use electricity distributed by the state-designated monopoly. Ratepayers can opt to buy electricity from a number of suppliers, but they cannot say that they want PSE&G rather than ACE to deliver it. ACE is the delivery utility for South Jersey, period.
So a ratepayer does not elect to be their customer and pay their customer fee. Research shows that this monthly fee offsets costs for billing, meter reading, equipment and service line maintenance. In short, it is the cost recovery by ACE of a ratepayer having an account with them.
Like all of these charges, the customer charge fee is set by the New Jersey Board of Public Utilities, based on submissions from ACE. The utility asks for a specific fee, and the BPU most often says OK.
Societal Benefits Charge
Next in line on the bill is the largest of the “other” fees, the Societal Benefits Charge. This is the charge about which ACE President Phillip Vavala could not respond when asked by Assemblyman Alex Sauickie during a hearing on electricity prices in Trenton Oct. 2. Sauickie wanted to know why the ACE Societal Benefits Charge is so much higher than the same charge at the other three distribution utilities in New Jersey. Vavala’s reply was, “I have no answer for that.”
The charge allows the utility to “recover costs” related to programs that provide social benefits as defined by state code and the BPU. These may include collecting to contribute to nuclear plant decommissioning, contributions to the state’s Clean Energy Program, gas plant remediation, and funds that offset low-income programs run by ACE.
There is no way for the customer to know the specific use made of this fee except perhaps to read the BPU docket when the agency approved the fee. It is a document that the average member of the public would have great difficulty making sense of.
RGGI Energy Charge
Third on the list of “other” charges is another mandatory fee, by which the ratepayer contributes to the Regional Greenhouse Gas Initiative. It is a program to require plants to purchase allowances for the carbon dioxide they emit.
The RGGI is a cooperative agreement involving 11 states, including New Jersey. There is a complicated process that involves a regional cap on carbon dioxide emissions from regulated power plants, auctions and allowances. The basic idea is fossil fuel plants are required to purchase allowances for each ton of carbon dioxide they emit.
What is not terribly clear is what the fee on the monthly bill goes for. It appears to be a required “contribution” to the state’s “climate, clean energy and equity goals.”
Conservation Incentive Program Charge
The Conservation Incentive Program fee allows the utility to recover lost revenues from energy-efficiency programs. New Jersey has several programs that help residents conserve energy. They cost the distribution utility like ACE money. This charge allows them to recover those revenues.
In effect, utilities participating in CIP receive incentive payments for participating in energy-efficiency programs.
Zero-Emission Certificates Charge
The Zero-Emission Certificates charge was enacted in 2019 to provide the funds needed to keep open the state’s nuclear power plants. It was seen as necessary to helping the state meet its clean energy goals. It is now set to be eliminated as of June 1, 2025.
The state’s nuclear power plant operators will replace the ZEC subsidy with a new tax credit from the federal government through at least 2032.
All five of the “other” fees are calculated on a customer’s bill as a rate times the amount of kilowatt hours billed to that customer. All of the charges are mandatory and cannot be bypassed. They all appear under the heading of delivery, which is the portion of the bill that is paid directly to ACE.
Contact the reporter, Vince Conti, at vconti@cmcherald.com.
