My name is Nusha Wyner. I am an attorney representing the New Jersey Division of the Ratepayer Advocate. The Division of the Ratepayer Advocate represents the interests of all utility customers, including residential, small business, commercial and industrial ratepayers. The Division is also a party in every case where New Jersey utilities seek changes in their rates or services. The Ratepayer Advocate gives customers a voice in setting long-range energy, water and telecommunications policy that will affect utility services for many years to come.

Public Service Electric and Gas Company ("Public Service" or the "Company") is a combination gas and electric utility which provides natural gas utility services to more than 1.6 million customers located in Bergen, Hudson, Passaic, Essex, Morris, Somerset, Hunterdon, Mercer, Monmouth, Ocean, Burlington, Camden and Gloucester Counties.

On August 11, 2000 the Company filed a petition before the Board of Public Utilities ("BPU" or the "Board") requesting Board approval to transfer Public Service’s gas supply and capacity contracts and operating agreements to an unregulated affiliate. The Company also asked the Board to allow it to repurchase the transferred gas from the unregulated affiliate under a Requirements Contract, which means that the affiliate would have to sell Public Service all the gas it needs for its customers. The Requirements Contract between the Company and the affiliate is proposed for a period of three years, with the affiliate having the option to supply the Company’s residential gas sales customers for an additional two years. The Company states that, after the portfolio transfer, the affiliate would bear the financial risks associated with the contracts and that the transfer will avoid the risk of potentially significant stranded costs for Public Service’s customers.

In addition to the proposed contract transfer Public Service has asked the Board to authorize the Company to offer an optional capacity release program and to eliminate the annual commodity pricing component from its Commodity Service (CS) rate schedules. The optional capacity release program will provide third-party suppliers with the opportunity to obtain interstate capacity to bring natural gas to their gas customers on Public Service’s system. The Company contends that this proposal will develop a more competitive marketplace for gas in New Jersey while maintaining supply reliability. .

Public Service also wants to move its firm gas customers currently under the levelized gas adjustment clause mechanism (which includes all residential sales customers) to Basic Gas Supply Service ("BGSS"), a service which would price gas monthly based on market-based indices. The Market Based Gas Service ("MPGS") could result in customers’ gas rates changing monthly.

The Board of Public Utilities has transmitted this case to the Office of Administrative Law for hearings which are scheduled for February and March 2001 in front of Administrative Law Judge Louis McAfoos. The Ratepayer Advocate is participating in this proceeding and will be presenting its own witnesses in this case.

In these proceedings, as in all proceedings in which the Ratepayer Advocate participates, the ratepayers’ best interests are our primary concern. We have begun our review of the Company’s filing and together with other intervenors, including gas marketers, have already asked numerous data requests. We have some specific concerns with the Company’s proposal; our major issues are listed below.

- One of our concerns is the proper valuation of the contracts being transferred. Public Service is requesting that these contracts be transferred without consideration of their potential value. The Ratepayer Advocate believes that these gas contracts, for which ratepayers paid over many years, have a tangible value and that the ratepayers are entitled to share in the full market value of the contracts.

- We also want to ensure that, if the contracts are transferred, the unregulated affiliate will not have excessive market power. We are therefore looking for ways to ensure a competitive marketplace, including marketer access to the transportation and storage capacity associated with the contracts.

- We will also review the Company’s proposal to serve its basic gas supply customers through a full requirements contract with the unregulated affiliate. The Ratepayer Advocate will scrutinize that proposal to ensure that whoever provides basic gas supply customers will do so on the most favorable terms available and within the context of ensuring a competitive marketplace.

- We will also review the terms of the Requirements Contract. Under the Company’s proposal, Basic Gas Supply Service will be priced at a monthly index. We are concerned that this may lead to volatile pricing, since it does not include the traditional stabilizing effects gained from storage and hedging. Moreover, currently ratepayers receive significant benefits from off-system sales opportunities from the Company’s gas portfolio. The Company proposes to retain all these benefits for its unregulated affiliate.

- We also need to assure continued reliability under the Requirements Contracts, including appropriate penalty provisions for non-delivery. The current California energy crisis has made all of us aware that a transfer of responsibility from a regulated utility subject to regulatory oversight to a non-regulated entity not so subject may produce dire and costly consequences for consumers. We will do our best to ensure that this will not happen in New Jersey.

The Ratepayer Advocate will provide recommendations to the Board concerning these issues as outlined above, and any other parties that are or become involved as these proceedings continue. As always, the Board of Public Utilities will make the ultimate decision regarding these and all other utility matters in New Jersey.

The purpose of this public hearing is for you, the customers, to voice your opinions, relate your experiences and offer comments about the Company’s filing. This hearing is being transcribed, and your comments will become part of the official record in this case. The judge will instruct you to give your name and address before you speak. It is important that you express your views, as they become part of the record on which the Board of Public Utilities will make its decision. The Board needs to hear from consumers directly what the impact of this proposal may have on your rates as well as what impact increased rates will have on your budgets and your ability to pay. The Ratepayer Advocate also wants to hear your views. We strongly encourage your participation, which will help us evaluate the Company’s proposal.

We know that you may have concerns about this proposal. I am available tonight, on behalf of the Ratepayer Advocate, to discuss your concerns, as are representatives of the Board’s Staff. We will be available to meet with you and answer questions at the conclusion of tonight’s public hearing.

On behalf of the Ratepayer Advocate, I would like to thank you for attending this hearing.

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