New Jersey Begins Review of Electric Utility Revenue Structure and Operations

The New Jersey Board of Public Utilities held a public stakeholder session on May 7 to kick off a statewide examination of how electric distribution companies operate and earn revenue. The meeting took place at the Conference Center Auditorium at Mercer County Community College in West Windsor Township.

The session marks the start of the Utility Business Model Reform Study. State officials call it one of the most sweeping regulatory reviews undertaken in decades. The study fulfills a top directive of Governor Mikie Sherrill’s Executive Order No. 1.

“This proceeding is one of the most consequential regulatory reviews New Jersey has taken on in a generation,” said NJBPU President Christine Guhl-Sadovy, according to RoI-NJ. “It goes to the core question of how utilities should earn revenue in a modern energy system.”

An independent consultant will lead this study on modernizing New Jersey’s electric distribution company business model. The board approved the consultant at its April 22 meeting. The review will look at regulatory and ratemaking reforms, including performance-based ratemaking, multi-year rate plans, and alternative approaches to earnings and cost recovery.

The current model has long rewarded electric distribution companies for capital investment. This happens whether cheaper or more effective alternatives exist or not. If adopted, proposed changes could shake up long-standing practices and curb the cycle of capital-driven rate increases.

Four former state public utility commissioners moderated roundtable discussions during the morning session. Jay Griffin, former chair of the Hawaii Public Utilities Commission; Sarah Freeman, former commissioner of the Indiana Utility Regulatory Commission; Jamie VanNostrand, ex-chair of the Massachusetts Department of Public Utilities; and Carrie Zalewski, former chair of the Illinois Commerce Commission, shared their experience navigating reform in their respective states.

NJBPU Executive Director Robert Babston walked participants through the board’s existing cost recovery mechanisms and ratemaking principles. The Regulatory Assistance Project presented an introduction to performance-based regulation, the mechanism at the heart of the reform discussion.

The afternoon portion shifted to facilitated discussions. Participants weighed in on regulatory goals, priority customer outcomes, and specific mechanisms most relevant to New Jersey’s energy system. The board will hold additional stakeholder sessions as the study moves forward.

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