Changing a system, a century old instead of setting rates that encourage utility companies to sell as much energy as possible the new head of PSEG wants incentives to conserve as much energy as possible. PSEG’s Chief Executive Ralph Izzo joins NJTV News Business Correspondent Rhonda Schaffler.
Schaffler: Ralph, you’ve been thinking about and talking a lot about the future of energy in New Jersey, and you really see demands changing from customers. Fill me in a little bit about what you’re thinking.
Izzo: We’ve tried to articulate a multipart future to energy. The first part is one in which people use as little as they need to preserve their comfort in the summer and the winter, in the evening and the daytime. The second is whatever they need is produced as environmentally friendly a manner as is possible. And the third is that it’s delivered as reliably as is possible. So use less, have less of an impact on the environment and have fewer interruptions.
Schaffler: And what does that mean for bills?
Izzo: Well, it should lower bills if you are using as little as possible, right? I like to think of electricity as a tax on living. Most people, not even I, wake up in the morning and say I can’t wait to use a kilowatt hour. That’s not in our DNA.
Schaffler: Well, they think about that after Superstorm Sandy when you’re really thinking about your electricity, so let me just get that out of the way. Obviously, a lot of work was done after that, but as we head into hurricane season you’re feeling confident about the reliability as best to your ability.
Izzo: Yes. I think the key there is to the best of our ability. We received authorization to do about a third of what we thought needed to be done and that first phase is now coming to completion, but there is a lot more work that needs to be done. Let’s face it, New Jersey is a wonderful place but the infrastructure is old and that infrastructure needs to be upgraded.
Schaffler: On the subject of energy efficiency, you’ve invested about $330 million with energy efficiency.
Izzo: That’s correct.
Schaffler: One thing that you’re thinking about is something other states have done. You’re pushing for something called decoupling.
Izzo: That’s right, so decoupling would basically say that utilities are no longer compensated for the amount of electricity and natural gas they deliver through their wires and pipes. But instead, that rate changes such that we’re compensated for the investments we make. That fundamentally changes that we’re equally incented to invest in an efficient light bulb as we are in a transformer. So what we’ll do is what’s best in terms of the environment, reducing the customer’s bill, because remember, the rate is just part of the bill. It’s the rate times how much you use that determines the bill. So if we can lower how much you use, we lower the bill.
Schaffler: So, in some other states where this has been done, consumer advocates have raised issues about it. I think we should address that because some people worry that the bills actually would go up.
Izzo: The concern is twofold. Some people think that as you make the usage of energy more efficient in the home, people will get a little bit sloppy about lifestyles. “Oh, that bulb doesn’t use much. I won’t shut the lights off as I leave the room.” That’s called the rebound effect. And we do need to teach people that, no, the whole idea here is to use the same behaviors, but with this efficient equipment the bills will come down. The second is, as you know, our electricity use varies depending upon the economy, the weather and other factors that might not be directly related to putting a more efficient appliance in. How do we factor that into the calculation?
Schaffler: In terms of actual electricity generation, there is a lot going on. Renewables is an area you’ve invested in, some coal plants will be going offline eventually. I’m wondering if that is a little out of sync now with what is happening in Washington because it seems that President Trump thinks the other way makes sense.
Izzo: With all due respect to what’s being discussed in Washington, the industry is united. We’re not going back to forms of electricity that produce mercury, sulfur dioxide and particulate matter. We’re going to see a continued shift toward natural gas and renewables with hopefully nuclear being the foundation of the bridge between the emissions-free future that we expect. I don’t think we’re going to see a push back toward the traditional fossil fuels, particularly coal, for electricity production.
Schaffler: I know you think very strongly about nuclear. It’s just one of those energy sources that still makes people nervous all these years later. Do you think you will get the funding you need to continue operating plants?
Izzo: We are trying in every way to make sure that’s the case. Nuclear produces 97 percent of the emissions free-electricity in New Jersey. It produces 65 percent of the emissions-free electricity in the rest of the country. We’re not championing building a new nuclear plant. We’re just saying that the existing nuclear plants have 20 to 30 years of emissions-free electricity they can generate and that’s a smart investment to keep operating.
Schaffler: I know that PSEG recently filed for natural gas increase, first in nine years. That’s actually passed right through. That’s not a profit area for you, so you don’t make money off of that. But generally speaking, do you see bills, can they hold steady, with all that’s going on, or should customers really brace for the fact that in the future bills will rise like everything else?
Izzo: I think that they’ll stay steady. The two factors that will offset each other is bills will go up as we invest in renewables and in more a resilient grid, which is why energy efficiency is so important. The cheapest form of electricity is the electricity you don’t use, so we’re trying to advocate for all of the above. Yes, let’s put upward pressure on the bill as we clean up the supply and as we make it more reliable in its delivery. But let’s lower the bill as we invest more heavily in energy efficiency, and hopefully that will keep us about flat.
Schaffler: Ralph, it’s so great to talk to you. Thank you.
Izzo: Thank you.