A5168

An Act concerning electric generation in the State and supplementing Title 48 of the Revised Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. This act shall be known and may be cited as the “New Jersey Energy Security & Affordability Act.”

2. The Legislature finds and declares that:

a. New Jersey residents and businesses are experiencing sustained increases in electricity costs driven in part by insufficient in-State generation capacity, regional transmission congestion, and exposure to wholesale market volatility.

b. The State’s current electric generation framework under the “Electric Discount and Energy Competition Act,” P.L.1999, c.23 (C.48:3-49 et al.), was designed to promote competition. However, market conditions have materially changed, resulting in increased reliance on out-of-State generation resources.

c. Ensuring reliable, affordable, and resilient electric public utility service is a matter of public interest and economic necessity.

d. By authorizing, in a limited fashion, electric public utilities to procure or own strategic in-State electric generation resources and subjecting them to strict oversight and ratepayer protections, the State can reduce long-term energy costs, improve system reliability, and strengthen the State’s energy security.

e. Therefore, it is in the public interest to establish a narrow framework authorizing the development of strategic in-State energy resources while preserving the State’s competitive wholesale markets and protecting ratepayers.

3. As used in P.L. , c. (C. ) (pending before the Legislature as this bill):

“Board” means the New Jersey Board of Public Utilities or a successor agency.

“Electric public utility” means a public utility, as that term is defined in R.S.48:2-13, that transmits and distributes electricity to end users within the State.

“Net bill benefit” means a measurable reduction in total electric public utility costs to New Jersey ratepayers, including energy-related, capacity-related, congestion-related, and transmission-related charges, as determined by the board.

“Strategic in-State energy resource” means an electric generation resource, storage resource, or hybrid resource that combines generation and storage, located within the State that, as determined by the board, provides firm, dispatchable, or reliability-enhancing capacity; reduces or mitigates wholesale electricity costs, capacity charges, or transmission congestion for New Jersey ratepayers; and serves a demonstrated public need that is not adequately addressed through existing competitive market mechanisms. “Strategic in-State energy resource” shall include, but not be limited to: energy storage systems, including long-duration storage; dispatchable generation facilities designed to replace or reduce reliance on higher-emission or higher-cost resources; repowering, modernizing, or extending the life of existing in-State generation assets that are critical to system reliability; hybrid resources combining generation and storage; and clean firm generation or other emerging generation technologies, provided such resources meet emissions and performance standards established by the board.

4. a. Notwithstanding the provisions of the “Electric Discount and Energy Competition Act,” P.L.1999, c.23 (C.48:3-49 et al.), or any other law, rule, regulation, or order to the contrary, an electric public utility may:

(1) own, develop, or operate a strategic in-State energy resource; or

(2) enter into a long-term contract to procure capacity, energy, or ancillary services from an entity that operates a strategic in-State energy resource.

However, an electric public utility that elects to own, develop, operate, or otherwise procure generation capacity pursuant to this subsection shall not receive preferential treatment with respect to any State-regulated approval, permitting, or cost recovery processes.

b. An electric public utility’s authority to own, develop, or operate a strategic in-State energy resource shall be limited to the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill). Nothing in P.L. , c. (C. ) (pending before the Legislature as this bill) shall be construed to constitute a general repeal of the State’s competitive electric generation framework established pursuant to the “Electric Discount and Energy Competition Act,” P.L.1999, c.23 (C.48:3-49 et al.).

c. Charges assessed to customers for basic generation service provided pursuant to subsection a. of this section shall be transparent and based on the just and reasonable prudent cost to the electric public utility for providing basic generation service, taking into account the comparable cost of power purchased at prices consistent with market conditions by the utility in the competitive wholesale marketplace and any related ancillary and administrative costs, as determined by the board. Charges assessed to customers pursuant to this subsection may include a retail margin, as determined by the board.

d. An electric public utility that elects to own, develop, or operate a strategic in-State energy resource pursuant to subsection a. of this section shall file with the board an updated schedule of tariffs for approval, which schedule shall reflect any necessary changes to the electric public utility’s rates as a result of the utility’s decision to own and operate electric generation facilities, which changes shall include, but not be limited to, the bundling of the electric public utility’s rates.

5. a. Prior to owning, developing, or operating a strategic in-State energy resource pursuant to section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill), an electric public utility shall conduct a competitive solicitation process to evaluate the merits of:

(1) electric public utility ownership;

(2) build-transfer arrangements; or

(3) long-term contractual procurement from third-party developers.

b. After the competitive solicitation required pursuant to subsection a of this section has been completed, the electric public utility shall submit a project proposal to the board for approval.

c. (1) If the project proposal submitted by the electric public utility pursuant to subsection b. of this section is for contractual procurement pursuant to paragraph (3) of subsection a. of this section, the board shall approve the proposal if the board determines that it provides the greatest net bill benefit while meeting State reliability and policy objectives.

(2) If the project proposal submitted by the electric public utility pursuant to subsection b. of this section is for ownership, pursuant to paragraph (1) of subsection a. of this section, or for a build-transfer agreement, pursuant to paragraph (2) of subsection a. of this section, the board shall approve the proposal if the board determines that:

(a) the project provides a net bill benefit to ratepayers over the project’s expected life;

(b) the project includes enforceable cost caps and construction milestones;

(c) the electric public utility assumes a reasonable share of financial risk for the project, including cost overruns or underperformance; and

(d) the project does not result in unjust or unreasonable rates.

However, the board may condition its approval of a project proposal pursuant to this paragraph on performance-based ratemaking, clawback provisions, or earnings adjustments tied to project outcomes.

d. The board shall employ an independent consultant to oversee each solicitation required pursuant to subsection a. of this section and to submit findings to the board. The findings shall include, but not be limited to:

(1) impacts to ratepayers;

(2) system reliability benefits;

(3) environmental considerations; and

(4) how the proposal compares with available alternatives.

e. Each strategic in-State energy resource approved by the board pursuant to this section shall be subject to ongoing board oversight.

f. An electric public utility whose project proposal has been approved by the board pursuant to subsection c. of this section shall submit an annual report to the board, and the Legislature pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), detailing:

(1) project performance;

(2) actual versus projected costs;

(3) ratepayer impacts;

(4) reliability benefits; and

(5) emissions impacts, where applicable.

6. The board shall, in accordance with the “Administrative Procedure Act,” P.L.1968, c.410 (C.52:14B-1 et seq.), adopt rules and regulations as necessary to implement this act within 180 days of enactment, including, but not limited to, rules and regulations preventing self-dealing, cross-subsidization, or market distortion, including affiliate transaction safeguards, by any electric public utility that procures generation pursuant to subsection a. of section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill).

7. This act shall take effect immediately.

STATEMENT

This bill permits electric public utilities to own, develop, or operate a strategic in-State energy resource or to enter into a long term contract with a strategic in-State energy resource. Under the bill, an electric public utility that elects to own, develop, or operate a strategic in-State energy resource is to file an updated schedule of tariffs with the Board of Public Utilities (board) for approval, which schedule is to reflect any necessary changes to the electric public utility’s rates as a result of the utility’s decision to own and operate electric generation facilities.

The bill defines the term “strategic in-State energy resource” to mean an electric generation resource, storage resource, or hybrid resource that combines generation and storage, located within the State that, as determined by the board, provides firm, dispatchable, or reliability-enhancing capacity; reduces or mitigates wholesale electricity costs, capacity charges, or transmission congestion for New Jersey ratepayers; and serves a demonstrated public need that is not adequately addressed through existing competitive market mechanisms.

This bill requires electric public utilities to conduct a competitive solicitation to evaluate utility ownership, build-transfer arrangements, and long-term contractual procurement from third-party developers. After the competitive solicitation has occurred, an electric public utility is required to submit a project proposal to the board. The board is required to approve an electric public utility’s project proposal if the board determines that the proposal meets certain conditions outlined in the bill.

New Jersey residents and businesses are experiencing sustained increases in electricity costs. The State’s current electric generation framework under the Electric Discount and Energy Competition Act was designed to promote competition. However, market conditions have materially changed, resulting in an increased reliance on out-of-State generation resources. This bill would establish a narrow framework authorizing the development of strategic in-State energy resources.