TESTIMONY OF SEEMA M. SINGH, ESQ.
RATEPAYER ADVOCATE
NJ DIVISION OF THE RATEPAYER ADVOCATE

THE STATE OF UTILITY RELIABILITY IN NEW JERSEY
Assembly Telecommunications & Utilities Committee
Monday, February 9, 2004
Committee Room 15
State House Annex, Trenton
10 a.m.

Good morning, Chairman Caraballo and members of the committee.   Thank you for inviting me to speak on the state of utility reliability in New Jersey.  We are here today to address a very crucial topic, which affects the lives of every single resident and business of this state – the reliability of utility service in New Jersey.

As we have seen this past summer, regarding electric reliability, with the July 4^th weekend power failure and the August 14^th Northeast blackout, our reliance on electricity is vital in order to enable us to carry out our everyday lives. 

Power failures come in many forms, through weather-related events such as hurricanes and ice storms; failures from poor maintenance of poles and wires; and failures from human error.  No matter how the blackout occurred, one thing is clear, the twenty-first century customer demands nothing less than almost instantaneous power restoration.

We live in a society where electricity is crucial to the proper and orderly functioning of our daily lives.  It is used to light our homes, power our cooling systems, and run our computers.  It is also vital for the operations of water and wasterwater utilities.  When the power goes out, everything stops.  The city of Cleveland experienced over a half million people without water during the blackout. 

Simply put, we cannot function without power.  

While demanding quick restoration, customers do not want to hear the phrase “rate increase” to pay for these system upgrades and aggressive maintenance levels.  Ratepayers believe they have been paying the utility companies over the years so that the transmission and distribution system would be properly maintained.  It is difficult for them to accept yet another rate hike to pay for these improvements that the utility should have been doing in their normal course of business.    

That is why there is an office of the Ratepayer Advocate -- to give the ordinary consumer a voice in the rate setting process.  When a utility requests a rate hike before the BPU, the Ratepayer Advocate plays a vital role in protecting consumers.  And that is exactly what we do every day -- challenge each and every utility company to justify and substantiate every penny they seek to pass on to consumers.  While we realize that some increases are justified, we need to balance those increases with the customer’s ability to pay.

On the Federal level, while the Energy Bill is stalled in Congress, the Chairman of the Federal Energy Regulatory Commission, Pat Wood, has publicly stated that FERC will be creating a new reliability division along with new mandatory reliability standards.  Chairman Wood has been quoted to be “more than frustrated” to learn that many of the causes of the 2003 blackout were the same as earlier major blackouts in 1965, 1996 and 1997.  Some of the major problems that caused the 2003 blackout, as well as earlier blackouts, were poor vegetation management and lack of communication among utilities.  While I am hopeful that FERC will adopt mandatory reliability standards with penalties, New Jersey should not sit idly by and wait for the federal government to address this crucial area.

Just weeks prior to the August 14^th Northeast Blackout, our shore area residents suffered a tremendous loss from the JCP&L power outage which occurred over the July 4^th holiday weekend.  Unfortunately, it took an event of this magnitude to get everyone’s attention.     

Governor McGreevey took the lead and ordered the BPU to conduct an investigation.  I am hopeful that the BPU’s investigation will determine not only the cause of the blackout, but also whether ratepayer money has been properly spent to maintain the distribution system.

I also hope the U.S. Department of Energy’s federal investigation will report on whether utilities across America are wisely spending ratepayers’ money to maintain their systems – or giving it to stockholders.

The Ratepayer Advocate has consistently called for permanent performance standards and automatic penalties.  If a company fails to live up to these standards, then it should be assessed automatic penalties out of corporate profits.  That means shareholders will pay for management’s failure to deliver reliable service.

Rates are set to enable a utility to provide safe, proper and reliable service.  If a company does not adequately maintain and upgrade its system, ratepayers are not getting the service they are paying for.  Making shareholders shoulder responsibility for poor performance is the best way to ensure that utility service improves. 

Given the current state of our nation’s transmission system, investment in “Smart Grid” technologies should be explored.  However, as I just stated, one must balance the costs associated with deploying these new technologies against the financial impact the investment will have on our state’s ratepayers.

Some have suggested that customers install rooftop solar panels or gas fired micro-turbines to reduce our dependence of the electric transmission and distribution grid.  But even with today’s outstanding renewable energy rebate programs, many consumers still do not have the cash on hand to purchase this technology. 

Under the leadership of Governor McGreevey and BPU President Jeanne Fox, New Jersey is becoming the national leader in promoting this technology.  And over time, the price to implement these new highly efficient and environmentally sound technologies should drop.  Until this happens, however, customers will still be dependent on the practices of the utility companies, to ensure that their transmission & distribution are properly maintained to be able to deliver power in times of peak demand.

That being said, we must all do everything in our power to urge consumers to conserve energy.  My office has launched an aggressive consumer education campaign to educate consumers on how to reduce their energy costs.  Municipalities are also well situated to get this message to their residents.  We should take advantage of the many community events that towns have, such as senior citizens clubs, recreation leagues, and community events, to urge consumers to conserve energy.

Conservation, in my opinion, can help prevent another blackout.  Conservation provides a critical buffer between uninterrupted service and power outages during peak demand time - in the sweltering heat of July and August.  Conservation does not mean you have to sacrifice your lifestyle or personal comfort.  You don’t have to sit in the dark, shivering in winter or sweating in the summer.  It does mean, however, that you have to make choices and take individual action.

My office took the initiative and held a conference last November to commence a comprehensive, statewide Energy Conservation crusade.  In furtherance of that policy, I will go to each county and town where invited to advocate energy conservation as well as energy aggregation programs to help consumers deal with rising energy costs.

In addition to saving money by reducing energy consumption, conservation changes the manner in which we think about energy.  Conservation can help people’s attitudes toward energy generation and consumption.  Just as people discovered that recycling is an easy way to save money while also benefiting the environment, so they will find out that a dedicated program of energy conservation accomplishes these same worthwhile goals.  Green is not just the color of the environment.  Green is also the color of money.  Conservation saves both.

Conservation is also an important concept when it comes to our state’s water resources.  As our recent experiences have shown, even a water-rich state like New Jersey is vulnerable to drought and water supply degradation. While we continue to explore ways to move water from areas with ample supply to areas suffering from shortages, there are limited opportunities for interconnections between different regions in our state.  These are only some of the reasons why I support the Governor’s clean water initiatives.  Another reason has to do with saving consumers money.  The easiest and safest way for people to enjoy safe drinking water from their spigots at home is to keep the supplies -- groundwater, reservoirs, lakes, rivers and streams -- free of contamination.  Preventing overdevelopment and sprawl into the Highlands and Pinelands is an important tool in protecting our water supply.

Protecting our water supply has taken on another meaning in recent years.  Regulators and water purveyors now have to be vigilant to guard against threats to our drinking water system, including our basic supplies, our treatment and storage facilities, and our distribution infrastructure.  The federal government has made some financial resources available, but we all need to participate in the security of our water supply.  Our utilities must work with county and state health officials to detect and respond to waterborne illnesses.  Our utilities must cooperate and share information with local law enforcement, emergency and government officials, emergency management organizations, and federal officials like the FBI and EPA.  Unfortunately, this increased vigilance means increased staffing levels and investments in other security measures such as improved fencing, security cameras, patrols and testing.  Despite the federal funds available, this will mean some higher costs.  My office will continue to work with the BPU and the utilities to control these costs and make the added expenditures as effective as possible.

I would also like to touch briefly upon another utility service that can be disrupted during a power failure -- telephone service.  A telephone outage was realized by hundreds of residents during last summer’s July 4^th power outage.  It was brought to my office’s attention, during the public hearings held in Seaside Heights, that many residents were without telephone service.  Many landlines went dead because apparently the battery-powered backup generators were not functioning properly.  Also, cell phone service was disrupted due to the heavy volume of traffic because people were without landlines, and were stranded on the Boardwalk, beaches and restaurants using their cell phones.  Even those who had a cell phone could only use it for a limited amount of talking time because once the battery ran out, there was no electricity to charge it up again.

As a result of these various utility outages, I would support legislation that would create performance standards for all utilities with penalties.   

Regarding Cable TV service, which many people consider a lifeline service, especially the elderly and the homebound as this is their only connection to the outside world for weather and news, I am pleased to be here today to voice my support for many of the changes that the BPU has adopted that will ensure better accountability on the part of cable television operators in their provision of safe, adequate, and proper service to cable customers. 

            I commend the BPU and its Office of Cable Television for their continued commitment to protect New Jersey consumers from improper cable operator practices.  These new cable regulations place a strong emphasis on customer service concerns and establish safeguards to protect consumers from unreasonable procedures by cable operators. These cable regulations are in direct response to the growing customer dissatisfaction regarding the quality and cost of cable services in New Jersey.  The BPU itself has received an inordinate number of customer complaints concerning billing issues, cable service interruptions, and difficulty reaching a customer service representative. These regulations will strengthen the BPU’s regulatory power by setting enforceable requirements for the installation of cable service, cable service appointments, answering phone calls, and the provision of outage credits to customers.

Furthermore, these cable service problems are even more intolerable for customers when coupled with high cable rates.  Since deregulation of the Cable Programming Service tier of cable rates on March 31, 1999, New Jersey consumers have been subject to an increase of 51.5 percent in these rates, greatly surpassing the Consumer Price Index of 9.43 percent over this same period.  The escalating price of cable services has been a huge concern for regulators and legislators alike.  The legislators have responded to this concern by proposing several bills aimed at fostering competition among cable companies in the hope that market forces would drive down cable rates and increase service quality. 

Although the BPU has no control over cable rates above the basic tier, it still retains the authority to implement customer service and service reliability requirements for cable operators.  As a result, the Legislature is moving forward with legislation sponsored by Assemblyman Van Drew that specifically addresses customer service improvements for cable customers in New Jersey. 

In conclusion, I applaud the leadership efforts of Governor McGreevey, as well as Assemblyman Caraballo, Assemblyman Van Drew, the members of this committee and the entire Legislature for working to bring choice, improved customer service, and reliability to New Jersey’s utility consumers.

While I will be there every step of the way aggressively advocating on behalf of the consumers of the state of New Jersey, I am embarking on a statewide energy conservation campaign.  I ask that you join with me in getting the word out to your residents and businesses to conserve, conserve, conserve.   Conservation may be what stands between us and the next major blackout. 

To help you get the word out, my office has prepared the first Ratepayer Advocate Energy Conservation Handbook.  It is a simple to read, easy to use guide to help the average person conserve energy.  We specifically included many money-saving conservation tips that are easy and inexpensive to implement.  In fact, many cost nothing at all.  The more suggestions people adopt, the more they can save.  These free handbooks are available on our website or by contacting our office.

I again repeat my offer, I will go anywhere in the state where invited to educate and inform your constituents on energy conservation or any other utility matter that is of interest.

I stand ready to work with you on crafting workable reliability standards with financial penalties so that ratepayers get the service they deserve.

Thank You.