When a steel mill threatened to pull out of New Jersey and move to the Southeast where electricity rates are cheaper, Public Service Electric & Gas Co. (PSE&G) did some creative thinking.
How could it keep the mill, Co-Steel Raritan, and its 500 jobs and $36-million annual payroll in Perth Amboy, NJ?
After considerable negotiation, PSE&G proposed an experimental hourly pricing plan that lets Co-Steel Raritan take advantage of the lowest fuel costs within the Pennsylvania-New Jersey-Maryland (PJM) pool. In return, the steel mill promises to forego the move and actually expand its present operations.
PSE&G, the nation's fourth-largest combined utility, has been very active in attempting to retain its large industrial customers in the face of relatively high electric rates. Two years ago, to keep its largest industrial customer, Tosco Corp.'s Bayway oil refinery, PSE&G negotiated a special contract that involved the State of New Jersey as well as the New Jersey Board of Public Utilities (BPU). PSE&G officials are optimistic that the BPU will approve tariff changes to implement the proposed flexible rates that will tempt Co-Steel Raritan to stay.
Under the plan, Co-Steel Raritan would see a $7.3-million reduction in its annual $26-million electric bill, largely as a result of improved operating efficiencies. That includes a $1.8-million reduction in the $3.6-million gross receipts and franchise tax component of the steel mill's utility bill. In return, Co-Steel Raritan has promised to invest $37 million to upgrade its Perth Amboy facility. The company uses electric furnaces to melt scrap metal into reusable steel products.