History and Overview of Retail Competition in New Jersey
Competitive Auctions have been held each February since 2002 to secure electric supply for all non-switching customers of the State’s electric distribution companies (“EDCs”). The Basic Generation Service (“BGS”) consists of two auctions, held concurrently: one for large customers on an hourly price plan (“BGS-CIEP”) and one for small commercial and residential customers on a fixed-price plan (“BGS-FP”). Approximately 2,000 accounts (representing 3000 MW of load) are eligible for retail choice statewide. About 2500 MW of hourly load (85%) has switched to a retail supplier as of November 2005. The BGS Auction has resulted in reduced prices for consumers and has protected consumers from fuel price volatility by locking in prices for 12-month and 36-month terms.

New Jersey ended its four-year rate cap on August 1, 2003. Auctions have been held each February to secure supply and to price BGS-FP and BGS-CIEP. The current threshold for mandatory inclusion in the CIEP class is 1250kW. The BPU has directed all utilities to include all C&I customers with a peak load of 1000kW and greater in the CIEP class beginning with bids submitted June 1, 2007.

The rate structure in the State (except for PSE&G) is a simple energy charge and a true-up or reconciliation charge. PSE&G has an additional demand component. The costs are seasonally adjusted using utility seasonal factors for each term. Average costs for winter and summer are translated into retail rates through the application of utility-determined ratios. Rates include a retail margin that is determined by the BPU and reset periodically and a Default Supply Service Availability Charge (“DSSAC”) or capacity charge (non-bypassable) that is paid to CIEP suppliers and represents a premium for assuming migration risks.

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