Ratepayers to Bear Above-Market QF Rates

The New Jersey Board of Public Utilities (BPU) has rejected a proposal to disallow from rates "potentially stranded costs" incurred by Atlantic City Electric Co., an electric utility, under several "above-market" purchased power contracts executed with qualifying cogeneration facilities (QFs) in the late 1980s. The utility had sought to recover the full costs incurred under the contracts by increasing its energy adjustment rate by 5 percent.

A group of municipalities and other governmental entities in the state had argued that funding $245.6 million in QF contract payments through the adjustment clause rates would cost customers $132.6 million above current market costs for the QF power, as well as over $11 million to fund 150 megawatts of "excess capacity" over the next two years. The group said the rate disallowance would enhance the utility's ability to retain customers currently at risk in an increasingly competitive market and that ratepayers should not be held responsible for drastic forecasting mistakes and associated business decisions by utility management.