Rep. Jeff Van Drew is continuing his push for an explanation and justification for rising electricity rates in South Jersey.

On Jan. 8 Van Drew (R-2) sent a letter to J. Tyler Anthony, the chief executive officer of Pepco Holdings, requesting an update on the electric utility’s efforts to better control electricity costs in the region. Pepco is one of the utility companies controlled by parent Exelon Corp. It was Pepco that acquired Atlantic City Electric; Pepco was then itself acquired by Chicago-based Exelon.

In his letter Van Drew asked for an update on a promised audit of the system that bills ACE customers. This summer his office got a large number of customer complaints that suggested extraordinary increases in electricity costs that went beyond reported rate increases approved by the state Board of Public Utilities. Van Drew announced that he had gained a commitment from Exelon for an audit of the ACE billing system.

The congressman requested information on any planned public events to address concerns about the rising costs and asked that unresolved constituent issues with the utility be resolved without delay.

He also asked if ACE has reconsidered its recent rate increase request that is sitting before the BPU. In its request for the rate increase, ACE told the BPU that it is seeking to recover costs for “investments made to our infrastructure, including system upgrades and energy system enhancements.” The rate increase, if approved, would raise a typical residential customer’s bill by about 8%, according to the utility.

The BPU has not taken action on the rate increase request and said recently that it expects to do so in April. In a letter from an ACE spokesperson, the utility says the suspension of the issue until April “is standard procedure that occurs during all filings.”

Pepco has not yet publicly replied to Van Drew.

The congressman has singled out ACE and its family of related utilities as a focal point for his drive to lower the cost of electric bills for residential and commercial customers in South Jersey. The fact that ACE had submitted a rate increase request provided a new target for that effort.

Yet the cost of electricity that ends up on a customer’s bill has multiple sources, only some of which are controlled by the utility that supplies the power to homes.

ACE is one of four utilities that have been designated by the state to distribute electricity to end-user customers. It is part of the task for ACE to ensure that the lights go on and the TV comes to life when you flip the appropriate switch.

What ACE does not do is generate the electricity, nor does it control some of the government-initiated fees that are part of the monthly bill and often have roots in state-level policies related to social justice goals and collecting funds for green economy incentives.

The average customer bill has three categories of expense. Supply costs are those charged for the generation and transmission of electricity from its source. In New Jersey, that means the 75% of the electricity that is consumed and comes largely from natural gas or nuclear generation and the 25% of electricity consumption that the state imports from out-of-state sources and that could come from a variety of sources, including the burning of a fossil fuel like coal.

The cost of electricity supply is generally set through auctions that are multistate affairs run by the grid operator PJM Interconnection. ACE has not had a role in the supply of electricity since the mid-1990s, when lawmakers forced the monopoly distribution utilities to sell off their generating operations.

The supply price comes through the ACE billing system directly to the customer, but it’s a “pass-through” expense for the utility. This is why there was such an outcry when a recent PJM auction resulted in ninefold increases in bid prices. The next set of supply costs for the 2025-2026 rate year are not yet known. ACE’s vice president for regulatory strategy, Amber Perry, has said that supply usually represents about 42% of the total customer bill.

The next-largest component of the bill is distribution, the actual movement of electricity to the customer. Perry says that portion of the bill is usually about 34% and is paid directly to ACE. Similar to distribution but handled separately is the cost of high-voltage transmission, which also is paid directly to ACE and represents, Perry says, about 14% of the total bill.

In transmission and distribution, Perry said, the company not only covers its operating expenses but also recoups, with BPU approval, its capital investments in its networks, which improve reliability and resilience. It is a rate increase to recover these costs that sits before the BPU now and that Van Drew is questioning.

The final 10% of the customer bill is labeled “other charges” and represents a series of fees. These are often state-mandated charges that supply funds for state programs related to aid to customers in need, green energy initiatives and incentives, and social justice efforts.

Van Drew’s effort, as outlined in his letter to Pepco, has two areas of focus. One is to ensure that the billing system is operating correctly and that what seem like very unusually high bills are indeed being billed within the context of approved rates. The other is a challenge to those rates as they are charged by ACE, which means a focus on the distribution and transmission costs that are paid directly back to ACE.

Contact the reporter, Vince Conti, at vconti@cmcherald.com.