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Utility giant’s plant-value case goes before NJ’s top court

By Donna Leusner , The Star-Ledger, Newark, N.J.

November 10, 2000 (Knight Ridder/Tribune)—Did the breakup of Public Service Electric & Gas unfairly shortchange its 1.9 million electric consumers?

That question was debated for more than four hours before the state Supreme Court yesterday as lawyers argued over the fair market value of PSE&G power plants that were transferred to an unregulated affiliate earlier this year.

The lawsuit has delayed a state-mandated 2 percent discount consumers were supposed to start getting last Jan. 1. For the typical customer, the cut amounts to $1.20 a month.

PSE&G officials say that without the ability to refinance its debt, it has no obligation to reduce rates. The utility contends that each month it is prevented from refinancing its debt, consumers suffer $7 million in lost savings.

Phyllis Kessler, a lawyer for the Business Users Group, a coalition representing manufacturers, contended the assets should have been valued $600 million higher and that consumers could see roughly double the projected $80 million a year that would have come from the 2 percent discount.

The transfer of the power plants was part of the breakup of the state’s largest electric monopoly. The state ordered the breakup last year in an effort to introduce competition and reduce electric rates.

PSE&G contends the Board of Public Utilities set a fair market value that allows the utility to recover $2.9 billion through a refinancing of its debt and other charges.

A state appeals court in April upheld the board’s action.

But business groups and the Ratepayer Advocate, who are challenging the board’s decision, contend that the state undervalued generating plants.

Kessler argued the case should be sent back to the board for a hearing to consider evidence of comparable power plant sales in neighboring states.

At times during the lengthy debate, Justice Gary Stein seem to agree: “Why wouldn’t the board say ‘Let’s open this up. Let’s have some testimony’? Instead, the board relied on an auditor’s report and recommended the middle ground. That process seems unfair.”

Stein said the board’s decision “could have a tremendous impact” on customers for more than a decade. Deputy Attorney General Helen Wallenstein and PSE&G attorney John Hoffman argued the board performed a balancing act and that its decision was reasonable and within its discretion. The objections of the ratepayer and the business groups were heard and considered, they argued.

“The process was fair,” Hoffman said. “The result was reasonable.”

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© 2000, The Star-Ledger, Newark, N.J. Distributed by Knight Ridder/Tribune Business News.