Prohibits public utilities from being eligible for rate treatment or other incentive or rate mechanisms that provide additional revenue to utilities in certain circumstances.

A4511

ASSEMBLY, No. 4511

STATE OF NEW JERSEY

222nd LEGISLATURE

�

INTRODUCED MARCH 9, 2026

Sponsored by:

Assemblyman� ALEX SAUICKIE

District 12 (Burlington, Middlesex, Monmouth and Ocean)

SYNOPSIS

���� Prohibits public utilities from being eligible for
rate treatment or other incentive or rate mechanisms that provide additional
revenue to utilities in certain circumstances.

CURRENT VERSION OF TEXT

���� As introduced.

��

An Act

concerning public utility rate treatments and
incentives and amending P.L.2018, c.17 and P.L.2007, c.340.

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

���� 1.��� Section 3 of P.L.2018,
c.17 (C.48:3-87.9) is amended to read as follows:

���� 3.� a.� No later than one year
after the date of enactment of P.L.2018, c.17 (C.48:3-87.8 et al.), the Board
of Public Utilities shall require each electric public utility and gas public
utility to reduce the use of electricity, or natural gas, as appropriate,
within its territory, by its customers, below what would have otherwise been
used.� For the purposes of this section, a gas public utility shall reduce the
use of natural gas for residential, commercial, and industrial uses, but shall
not be required to include a reduction in natural gas used for distributed
energy resources such as combined heat and power.

���� Each electric public utility
shall be required to achieve annual reductions in the use of electricity of two
percent of the average annual usage in the prior three years within five years
of implementation of its electric energy efficiency program.� Each natural gas
public utility shall be required to achieve annual reductions in the use of
natural gas of 0.75 percent of the average annual usage in the prior three
years within five years of implementation of its gas energy efficiency
program.� The amount of reduction mandated by the board that exceeds two
percent of the average annual usage for electricity and 0.75 percent of the
average annual usage for natural gas for the prior three years shall be
determined pursuant to the study conducted pursuant to subsection b. of this
section until the reduction in energy usage reaches the full economic,
cost-effective potential in each service territory, as determined by the board.

���� b.��� No later than one year
after the date of enactment of P.L.2018, c.17 (C.48:3-87.8 et al.), the board
shall conduct and complete a study to determine the energy savings targets for
full economic, cost-effective potential for electricity usage reduction and
natural gas usage reduction as well as the potential for peak demand reduction
by the customers of each electric public utility and gas public utility and the
timeframe for achieving the reductions.� The energy savings targets for each
electric public utility and gas public utility shall be reviewed every three
years to determine if the targets should be adjusted.� The board, in conducting
the study, shall accept comments and suggestions from interested parties.

���� c.���� No later than one year
after the date of enactment of P.L.2018, c.17 (C.48:3-87.8 et al.), the board
shall adopt quantitative performance indicators pursuant to the
"Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.)
for each electric public utility and gas public utility, which shall establish
reasonably achievable targets for energy usage reductions and peak demand
reductions and take into account the public utility's energy efficiency
measures and other non-utility energy efficiency measures including measures to
support the development and implementation of building code changes, appliance
efficiency standards, the Clean Energy program, any other State-sponsored
energy efficiency or peak reduction programs, and public utility energy efficiency
programs that exist on the date of enactment of P.L.2018, c.17 (C.48:3-87.8 et
al.).� In establishing quantitative performance indicators, the board shall use
a methodology that incorporates weather, economic factors, customer growth,
outage-adjusted efficiency factors, and any other appropriate factors to ensure
that the public utility's incentives or penalties determined pursuant to
subsection e. of this section and section 13 of P.L.2007, c.340 (C.48:3-98.1)
are based upon performance, and take into account the growth in the use of
electric vehicles, microgrids, and distributed energy resources.� In
establishing quantitative performance indicators, the board shall also consider
each public utility's customer class mix and potential for adoption by each of
those customer classes of energy efficiency programs offered by the public
utility or that are otherwise available.� The board shall review each
quantitative performance indicator every three years.� A public utility may
apply all energy savings attributable to programs available to its customers,
including demand side management programs, other measures implemented by the
public utility, non-utility programs, including those available under energy
efficiency programs in existence on the date of enactment of P.L.2018, c.17
(C.48:3-87.8 et al.), building codes, and other efficiency standards in effect,
to achieve the targets established in this section.

���� d. (1) Each electric public
utility and gas public utility shall establish energy efficiency programs and
peak demand reduction programs to be approved by the board no later than 30
days prior to the start of the energy year in order to comply with the requirements
of this section.� The energy efficiency programs and peak demand reduction
programs adopted by each public utility shall comply with quantitative
performance indicators adopted by the board pursuant to subsection c. of this
section.

���� (2)�� The energy efficiency
programs and peak demand reduction programs shall have a benefit-to-cost ratio
greater than or equal to 1.0 at the portfolio level, considering both economic
and environmental factors, and shall be subject to review during the stakeholder
process established by the board pursuant to subsection f. of this section.�
The methodology, assumptions, and data used to perform the benefit-to-cost
analysis shall be based upon publicly available sources and shall be subject to
stakeholder review and comment.� A program may have a benefit-to-cost ratio of
less than 1.0 but may be appropriate to include within the portfolio if
implementation of the program is in the public interest, including, but not
limited to, benefitting low-income customers or promoting emerging energy
efficiency technologies.

���� (3)�� Each electric public
utility and gas public utility shall file with the board implementation and
reporting plans as well as evaluation, measurement, and verification strategies
to determine the energy usage reductions and peak demand reductions achieved by
the energy efficiency programs and peak demand reduction programs approved
pursuant to this section.� The filings shall include details of expenditures
made by the public utility and the resultant reduction in energy usage and peak
demand.� The board shall determine the appropriate level of reasonable and
prudent costs for each energy efficiency program and peak demand reduction
program.

���� e. (1) Each electric public
utility and gas public utility shall file an annual petition with the board to
demonstrate compliance with the energy efficiency and peak demand reduction
programs, compliance with the targets established pursuant to the quantitative
performance indicators, and for cost recovery of the programs, including any
performance incentives or penalties, pursuant to section 13 of P.L.2007, c.340
(C.48:3-98.1).� Each electric public utility and gas public utility shall file
annually with the board a petition to recover on a full and current basis
through a surcharge all reasonable and prudent costs incurred as a result of
energy efficiency programs and peak demand reduction programs required pursuant
to this section, including but not limited to recovery of and on capital
investment,
[
and
the revenue impact of sales losses resulting from implementation of the energy
efficiency and peak demand reduction schedules,
]
which shall be determined by the
board pursuant to section 13 of P.L. 2007, c. 340 (C.48:3-98.1).

���� (2)�� If an electric public
utility or gas public utility achieves the performance targets established in
the quantitative performance indicators, the public utility shall receive an
incentive as determined by the board through an accounting mechanism established
pursuant to section 13 of P.L.2007, c.340 (C.48:3-98.1) for its energy
efficiency measures and peak demand reduction measures for the following year
,
provided that the electric public utility or gas public utility shall not be
eligible for an incentive that provides additional revenue to the utility to
account for lost revenue resulting from the decrease in customer usage of
electricity or natural gas, as appropriate, due to participation in energy
efficiency programs and peak demand reduction programs
.� The incentive
shall scale in a linear fashion to a maximum established by the board that
reflects the extra value of achieving greater savings.

���� (3)�� If an electric public
utility or gas public utility fails to achieve the reductions in its
performance target established in the quantitative performance indicators, the
public utility shall be assessed a penalty as determined by the board through
an accounting mechanism established pursuant to section 13 of P.L.2007, c.340
(C.48:3-98.1) for its energy efficiency measures and peak demand reduction
measures for the following year.� The penalty shall scale in a linear fashion
to a maximum established by the board that reflects the extent of the failure
to achieve the required savings.�

���� (4)�� The adjustments made
pursuant to this subsection may be made through adjustments of the electric
public utility's or gas public utility's return on equity related to the energy
efficiency or peak demand reduction programs only, or a specified dollar amount,
reflecting the incentive structure as established in this subsection.� The
adjustments shall not be included in a revenue or cost in any base rate filing
and shall be adopted by the board pursuant to the "Administrative
Procedure Act
[
.
]
,
"

P.L.1968, c.410 (C.52:14B-1 et seq.).

���� f. (1) The board shall
establish a stakeholder process to evaluate the economically achievable energy
efficiency and peak demand reduction requirements, rate adjustments,
quantitative performance indicators, and the process for evaluating, measuring,
and verifying energy usage reductions and peak demand reductions by the public
utilities.� As part of the stakeholder process, the board shall establish an
independent advisory group to study the evaluation, measurement, and
verification process for energy efficiency and peak demand reduction programs,
which shall include representatives from the public utilities, the Division of
Rate Counsel, and environmental and consumer organizations, to provide
recommendations to the board for improvements to the programs.�

���� (2)�� Each electric public
utility and gas public utility shall conduct a demographic analysis as part of
the stakeholder process to determine if all of its customers are able to
participate fully in implementing energy efficiency measures, to identify
market barriers that prevent such participation, and to make recommendations
for measures to overcome such barriers.� The public utility shall be entitled
to full and timely recovery of the costs associated with this analysis.

���� g.��� For the purposes of this
section, the board shall only consider usage for which public utility energy
efficiency programs are applicable.

(cf. �P.L.2018, c.17, s.3)

���� 2.��� Section 13 of P.L.2007,
c.340 (C.48:3-98.1) is amended to read as follows:

���� 13.� a.� Notwithstanding the
provisions of any other law or rule or regulation to the contrary:

���� (1)�� an electric public
utility or a gas public utility may provide and invest in energy efficiency and
conservation programs in its respective service territory on a regulated basis
pursuant to this section, regardless of whether the energy efficiency or conservation
program involves facilities on the utility side or customer side of the point
of interconnection;

���� (2)�� an electric public
utility or a gas public utility may invest in Class I renewable energy
resources, or offer Class I renewable energy programs on a regulated basis
pursuant to this section, regardless of whether the renewable energy resource
is located on the utility side or customer side of the point of
interconnection; and

���� (3)�� the board may provide
funding for energy efficiency, conservation, and renewable energy improvements
through the societal benefits charge established pursuant to section 12 of
P.L.1999, c.23 (C.48:3-60), the retail margin on certain hourly-priced and larger
non-residential customers pursuant to the board's continuing regulation of
basic generation service pursuant to sections 3 and 9 of P.L.1999, c.23
(C.48:3-51 and
C.
48:3-57), or other monies appropriated for such
purposes.� The board may also direct electric public utilities and gas public
utilities to undertake energy efficiency, conservation, and renewable energy
improvements, and shall allow the recovery of program costs and incentive rate
treatment pursuant to subsection b. of this section.

���� b.��� An electric public
utility or a gas public utility seeking cost recovery for any program pursuant
to this section shall file a petition with the board to request cost recovery.�
In determining the recovery by electric public utilities and gas public utilities
of program costs for any program implemented pursuant to this section, the
board may take into account the potential for job creation from such programs,
the effect on competition for such programs, existing market barriers,
environmental benefits, and the availability of such programs in the
marketplace.� Unless the board issues a written order within 180 days after the
filing of the petition approving, modifying or denying the requested recovery,
the recovery requested by the utility shall be granted effective on the 181st
day after the filing without further order by the board.� Ratemaking treatment
may include placing appropriate technology and program cost investments in the
respective utility's rate base, or recovering the utility's technology and
program costs through another ratemaking methodology approved by the board,
including, but not limited to, the societal benefits charge established
pursuant to section 12 of P.L.1999, c.23 (C.48:3-60).� All electric public
utility and gas public utility investment in energy efficiency and conservation
programs or Class I renewable energy programs may be eligible for rate
treatment approved by the board, including a return on equity, or other
incentives or rate mechanisms
[
that
decouple utility revenue from sales of electricity and gas
]
, provided
that the electric public utility or gas public utility shall not be eligible
for a rate adjustment mechanism that provides additional revenue to the utility
to account for lost revenue attributable to the decrease in customer
electricity or natural gas usage due to participation in energy efficiency,
conservation, or Class I renewable energy programs
.

���� c.���� Within 120 days after
the date of enactment of P.L.2007, c.340 (C.26:2C-45 et al.), the board shall
issue an order that allows electric public utilities and gas public utilities
to offer energy efficiency and conservation programs, to invest in Class I renewable
energy resources, and to offer Class I renewable energy programs in their
respective service territories on a regulated basis.� The board's order shall
be reflected in rules and regulations thereafter to be adopted by the board
pursuant to the "Administrative Procedure Act," P.L.1968, c.410
(C.52:14B-1 et seq.).

���� d.��� As used in this section:

���� "Class I renewable energy
program" means any regulated program approved by the board pursuant to
this section for the purpose of facilitating the development of Class I
renewable energy in the State.

���� "Energy efficiency and
conservation program" means any regulated program, including customer and
community education and outreach, approved by the board pursuant to this
section for the purpose of conserving energy or making the use of electricity
or natural gas more efficient by New Jersey consumers, whether residential,
commercial, industrial, or governmental agencies.

���� "Program costs"
means all reasonable and prudent costs incurred in developing and implementing
energy efficiency, conservation, or Class I renewable energy programs approved
by the board pursuant to this section.� These costs shall include a full return
on invested capital and foregone electric and gas distribution fixed cost
contributions associated with the implementation of the energy efficiency,
conservation, or Class I renewable energy programs until those cost
contributions are reflected in base rates following a base rate case if such
costs were reasonably and prudently incurred.

(cf. �P.L.2007, c.340, s.13)

���� 3.��� This act shall take
effect immediately.

STATEMENT

���� This bill provides that an
electric public utility or a gas public utility (collectively, �utility�) is
not permitted to impose or collect any rate adjustment mechanism that provides
additional revenue to the utility to account for lost revenue from the decrease
in energy usage due to customer participation in certain energy efficiency,
peak demand reduction, conservation, or renewable energy programs.

���� Under current law, a utility
may provide and invest in energy efficiency, peak demand reduction,
conservation and renewable energy programs in its service territory on a
regulated basis and may, if approved by the Board of Public Utilities (board),
be permitted to impose and collect rate adjustment mechanisms that provide
additional revenue to the utility to offset a decrease in consumption for
customers participating in certain programs.

���� It is the sponsor�s intent to
prohibit a utility from implementing a conservation incentive program rate
adjustment in response to the testimony provided by the Director of the
Division of Rate Counsel during the October 2, 2024 Assembly Telecommunications
and Utilities Committee meeting.� The Division of Rate Counsel testified that a
conservation incentive program rate adjustment enables a utility to make up for
a portion of revenues lost due to customer participation in energy efficiency
efforts by charging that loss back to all consumers.

���� It is the sponsor�s belief
that the board needs to work harder for the consumer and less for the utility
company.� There is no logical reason why ratepayers should work to reduce their
power consumption through conservation measures, such as purchasing Energy Star
appliances, increasing weatherization, installing light-emitting diode (LED)
lighting, using smart meters and thermostats, wearing warming clothing or sitting
in the dark, only to have these hard fought savings reduced or eliminated
through rate increases to make up for the utility companies loss of revenue.