November 19, 2001

Henry M. Ogden, Acting Secretary
New Jersey Board of Public Utilities
Two Gateway Center
Newark, New Jersey 07102

RE: 2001-02 LGAC Filings of Public Service Electric & Gas Company, New Jersey Natural Gas Company, NUI Utilities, Inc. d/b/a Elizabethtown Gas Company, and South Jersey Gas Company
(BPU Docket Numbers Not Yet Assigned)

Dear Acting Secretary Ogden:

Please accept this letter and ten copies as the motion of the Ratepayer Advocate to require all four of New Jersey’s natural gas utilities to implement on an interim basis, effective December 1, 2001, both their proposed Gas Cost Underecovery Adjustments ("GCUAs") and proposed Levelized Gas Adjustment Clause ("LGAC") gas cost recovery rates for 2001-02. For all of the utilities, this will result in a net decrease in rates, allowing New Jersey’s natural gas consumers to benefit from the recent sharp decreases in natural gas prices. The Ratepayer Advocate is filing this motion because one utility, Public Service Electric and Gas Company ("Public Service"), proposes to implement its GCUA, approximately a 3.5% increase for a typical residential heating customer, while delaying the effective date of a proposed 8.9% LGAC decrease until the Board has decided the Company’s pending litigated petition for a base rate increase.

As the Board is aware, during the 2000-01 winter heating season, rates for all of the natural gas utilities were increased by a total of 32% to 35 % due to unprecedented increases in wholesale natural gas prices. Nevertheless, all of the utilities asserted that these increased rates were insufficient to recover all of the increased wholesale prices. Following evidentiary hearings held before the Board in January, 2001, the Board allowed the utilities full recovery of the claimed under-recoveries over a three-year period, with simple interest at 5.5%, through a GCUA. All of the utilities were directed to include calculations in support of a GCUA surcharge with their 2001-02 LGAC petitions, which were to be filed on November 15, 2001. The Board provided that the surcharge was to be implemented on December 1, 2001, with a further provision that the Board could allow an increase in the interest rate to 5.75% for any utility proposing to implement its GCUA without raising its LGAC billing factor. I/M/O Public Service Electric and Gas Co., BPU Dkt. No., GR00070491, Decision and Order at 5 (March 30, 2001); I/M/O New Jersey Natural Gas Co. BPU Dkt. No., 99100780, Decision and Order at 5 (March 30, 2001); I/M/O NUI Elizabethtown Gas Co., BPU Dkt. No. GR00070470, Decision and Order at 5 (March 30, 2001); I/M/O South Jersey Gas Co., BPU Dkt. No., GR00050294, Decision and Order at 5 (March 30, 2001).

The Ratepayer Advocate received the required filings for Public Service, New Jersey Natural Gas Company ("New Jersey Natural"), and South Jersey Gas Company ("South Jersey") on November 15, 2001. The filing for NUI Elizabethtown Gas Company ("Elizabethtown") was received on November 19, 2001. Of the four companies, only one, Public Service is seeking to increase rate for consumers at a time when they should be entitled to a decrease. The Ratepayer Advocate believes that this is inconsistent with the intent of the Board Orders cited above. The Board specifically directed that the utilities filed their proposed GCUA calculations simultaneously with their LGAC filings. The Ratepayer Advocate believes that the purpose of this requirement was to allow the Board to offset the GCUA surcharge with any decrease in natural gas prices. The Public Service proposal would completely defeat the purpose of the simultaneous filing ordered by the Board.

Moreover, the Ratepayer Advocate notes that Public Service is seeking recovery of 5.75% interest for its unrecovered GCUA balance despite the fact that it is seeking a rate increase. Again, this is contrary to the purpose of the Board Orders. The higher interest rate was provided as an incentive for the utilities to propose recovery of their GCUA balances without increasing rates to consumers. Clearly, Public Service should not be permitted to collect the incentive while implementing a rate increase.

Public Service’s pending base rate case does not provide a justification for delaying the rate decreases to which their ratepayers are entitled. The pending rate case, in the Board’s Docket Nos. GR01050328 and GR01050297, is for a increase in the Company’s rates for distribution service, while the Company’s LGAC petition involves the Company’s rates for the natural gas commodity. The Company’s decision to seek an increase in its distribution rates does not justify its proposal to delay the commodity rate decrease that was contemplated by the above-cited March 30, 2001 Order in the Company’s 2000-01 LGAC proceeding.

All across the country, natural gas utilities are decreasing their rates to consumers to reflect the declines in natural gas prices that have occurred since last winter. (See attached Appendix A.) As shown by the New Jersey utilities’ filings, the decreases in wholesale natural gas prices are sufficient to provide New Jersey’s natural gas ratepayers with rate decreases, even with the implementation of the GCUA surcharges ordered by the Board. The Board should implement these decreases on an interim basis for all of the utilities, including Public Service.

SHS/bj
c: Service list

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