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NJ Board of Public Utilities Approves 2021 Electricity Auction Results

Auction results in stable energy costs for most New Jersey residents and business owners

The New Jersey Board of Public Utilities (BPU) approved the results of the state’s 20th  annual electricity auctions for Basic Generation Service (BGS), resulting in stable costs for electricity supplied to most residents and small and/or medium-sized businesses by Atlantic City Electric Company (ACE), Jersey Central Power & Light Company (JCP&L), Public Service Electric & Gas Company (PSE&G), and Rockland Electric Company (RECO), collectively, the New Jersey Electric Distribution Companies (EDCs).

“This year’s weighted average energy cost will be fairly stable for New Jersey residents and business owners, a welcome result in the midst of what has been a difficult year for many due to the pandemic,” said Joseph L. Fiordaliso, BPU president. “With these results, we look forward to continuing to uphold our mission of ensuring safe, reliable, and affordable utility service for all ratepayers in the Garden State, while also pursuing Governor Murphy’s ambitious far-reaching clean energy goals.”

The BGS auction determines, in part, the cost of electricity for most New Jersey residents and many businesses for a 12-month period starting June 1, 2021. The average monthly BGS residential ratepayer bill is expected to remain stable for most customers. Specifically, residential customers of JCP&L and RECO will see their average estimated bills decline by 0.7% and 0.4%, respectively. Residential ratepayers supplied by PSE&G will see an average estimated bill increase of 3.1%, and ratepayers supplied by ACE will see an average estimated bill increase of 0.2%. (Differences in cost allocation between rate classes account for the relative PSE&G increase.)

As a result of a November 2020 Board decision, the EDCs are now required to remove the transmission component of the BGS product for existing and future BGS contracts. Ratepayers will still pay for transmission service, but this service will now be provided directly by the EDCs instead of the BGS supplier. This decision is largely responsible for the observed decline in winning Residential and Small Commercial Pricing (RSCP) prices for all four EDCs, with declines of between 10.6% and 36.6% compared to last year’s auction.

The following table illustrates how the auction results will affect electricity supply costs for the average residential customer when the new rates take effect on June 1, 2021:

Monthly Impact of BGS Auction on Average Residential Accounts

EDC

Usage (kWh) Current Bill Increase

or Decrease

New Bill Percent Change
ACE 650

$128.89

$0.29

$129.18

0.2%

JCP&L 650

$89.41

-$0.59

$88.82

-0.7%

PSE&G 650

$119.79

$3.65

$123.44

3.1%

RECO 650

$115.71

-$0.44

$115.27

-0.4%

The Board’s approval of the BGS results covers two separate descending clock auctions conducted by NERA Economic Consulting beginning February 5 and ending February 9. The auction for Commercial and Industrial Energy Price (CIEP) service for large commercial and industrial customers was conducted on February 5 and February 8, and the auction for RSCP service for residential and small- to medium-sized commercial customers ran from February 8 through February 9.  Both auctions secured commitments for up to approximately 8,188 megawatts (MWs) of customer requirements.

The energy secured in the RSCP auction will meet one-third of the state’s residential and small business electric load requirements for the next three energy years, starting June 1, 2021. The remaining two-thirds of customer supply requirements for the 12-month time period beginning June 1, 2021 will be met by electric supply secured in the BGS Auctions held in 2019 and 2020.  The supply acquired through the CIEP auction is for one year. The state’s four regulated EDCs do not earn a profit on the cost of the electric supply secured in the auctions. These costs are passed through directly to ratepayers.

For CIEP ratepayers, the prices for all EDCs are lower than last year’s prices. The CIEP price is primarily driven by the cost of electric generating capacity from PJM’s Reliability Pricing Model (RPM) Auction and the cost of meeting the State Renewable Portfolio Standard (RPS). Capacity prices for the 2021-2022 service year were up slightly for PSE&G but were slightly lower for ACE, JCP&L and RECO. The CIEP price constitutes only a small portion of monthly bills of CIEP customers for the period from June 1, 2021 to May 31, 2022; the price of other components has remained fairly stable.

The CIEP product is a full requirements product. The energy portion of the product is priced at the spot price of energy. The price in the auction is meant to cover the costs of capacity and meeting state renewable portfolio standards.  As of June 2020, approximately 83% of the CIEP load is being provided through individual contracts with third-party suppliers. These contracts are negotiated in the competitive marketplace and are not affected by the CIEP auction results.

BGS-RSCP 36-Month Tranches (One “tranche” equals approximately 76 to 92 MW):

EDC

Closing Price (cents/Kwh) Total Tranches

ACE

6.420

7

JCP&L

6.477

20

PSE&G

6.480

29

RECO

6.692

1

BGS-CIEP 1-year Tranches (The tranche sizes are approximate, as follows: ACE – 80.45 MW; JCP&L – 76.74 MW; PSE&G – 75.46 MW; RECO – 54.69 MW):

EDC

Closing Price

$/Mw-day

Total Tranches

ACE

339.20

4

JCP&L

295.88

11

PSE&G

351.06

24

RECO

368.93

1

The winning bidders of the Residential and Small Commercial Pricing (RSCP) Auction are:

Axpo U.S. LLC

BP Energy Company

Calpine Energy Services L.P.

ConocoPhillips Company

CPV Shore LLC

DTE Energy Trading, Inc.

Exelon Generation Company, LLC

Hartree Partners, L.P.

NextEra Energy Marketing LLC

The BGS-CIEP Auction winners are:

ConocoPhillips Company

DTE Energy Trading, Inc.

Exelon Generation Company, LLC

Hartree Partners, L.P.

NextEra Energy Marketing, LLC

TransAlta Energy Marketing (U.S.) Inc.

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