South River officials mull changes in electric service

SOUTH RIVER — Borough officials are examining ways of changing the electric utility cost structure with hopes it will benefit ratepayers.

The potential “unbundling” of the electric rate structure, which is the subject of a study conducted on behalf of the borough, would allow residents to quantify the various components of their electric rates.

“This will be broken down and shown on their tax bill,” said Mayor Raymond T. Eppinger.

The study, which officials stressed is still in draft format, is being conducted by Utility Financial Solutions, based in Holland, Mich. Borough Business Administrator Andrew Salerno said the borough has spent $27,000 so far on the study. The contract is for $37,000.

Mark Beauchamp, president of Utility Financial Solutions, came to South River on July 20 for a workshop meeting to present officials with a draft copy of the study. This included four recommendations on how the borough could move forward regarding its electric rates.

South River is one of a handful of New Jersey municipalities that operate their own electric utilities as part of the cooperative Public Power Association.

The recommendations in the study include implementing a power cost adjustment — a potential 3.4 percent reduction in electric rates that would still allow the utility to maintain cash reserves above the minimum levels; designing rates to provide an overall revenue-neutral rate adjustment; going from the current distribution pricing structure of a declining block structure to an inclining block structure; and considering adopting a formula-based policy to establish a minimum cash reserve for the electric utility.

Eppinger said the special meeting was the first time the governing body sat down as a whole to listen to and discuss the results of the long-term financial plan. He said the next step will be to have Beauchamp come back and describe options for rate packages. Later, a public hearing would be held on the rate package that officials select.

“This will be by ordinance, so we have a few steps to go before anything is put in place,” the mayor said.

Eppinger said that presently residents just see the number of kilowatts they have used on their electric rate bill.

“With this, they will be able to actually see what they have been using,” he said. “Right now, the rates are set on a bundled basis. We’re breaking all the components of the electric rate apart to see that cost to run the utilities at borough hall [for example], to see that cost of the street lights [and so on],”

Eppinger noted that the change in cost structure will not bring about “some crazy new number.”

“This may help us see if some rates can be reduced,” he said.

The mayor said that over the years residents have complained about the rates being too high, but he has been told that the residential electric rates in South River are in line with investor utility rates such as those charged by PSE&G and JCPL.

The study, Eppinger said, is all part of the same process that included the installation of automated remote electric and water meters that the town has been installing at all 6,000 borough homes since February. The new meters give precise readings and allow homeowners to be aware of how they use power and when it is cheaper to use it, officials said.

The borough received $500,000 from the federal government for the meters to help offset their estimated $1.5 million cost. The Borough Council passed a bond ordinance to fund the remote electric and water meters in 2006.

Eppinger said the utility needs to be operated differently than it was in the 1980s and ’90s, and even five years ago.

“We live in a highly congested area and a different environment,” he said.

Councilman Rui Almeida had some concerns about the study.

“It is our job to [fix the problems with the electric surplus so we can] lessen the burden that running a borough puts on the backs of the electric utility’s customers,” he said. “I would argue that the borough’s overdependence on the utility is the genesis of many of the problems and inefficiencies the rate study recommendations purport to fix. That certainly would explain why some of these recommendations are a bit sketchy, in my opinion.”

Borough officials stressed that the study was informational and that no changes have been decided upon.

Councilman John Trzeciak said the study is being done for the long-term financial health of the borough, and the fat that it is being conducted shows that the current governing body wants to gather as much information as possible before taking any actions.