PSEG Agrees To $905 Million Settlement For 'Aging Gas Pipes'

Public Service Electric and Gas Company (PSE&G) announced on Tuesday that it had agreed to a $905 million settlement in principle with the staff of the New Jersey Board of Public Utilities (BPU) and the New Jersey Division of Rate Counsel to expedite the replacement of “aging gas pipes.”

In a filing with the BPU announced on March 2, PSE&G originally sought approval to invest $1.6 billion during five years to accelerate the replacement of 800 miles of cast iron and unprotected steel gas mains, and 55,000 unprotected steel service lines to homes and business.

The settlement will require the utility to replace up to 510 miles of gas mains and 38,000 service lines over a three-year period.

The agreement detailing this three-year program will be submitted to the BPU for formal approval in the coming weeks, PSE&G stated in a release.

According to PSE&G, the mains and service lines will be replaced with plastic piping, which is “much less likely to have leaks and release methane gas.”

The new elevated pressure systems will also enable the installation of excess flow valves that automatically shut off gas flow if a service line is damaged, and better support the use of high-efficiency appliances, PSE&G stated.

According to PSE&G, there will be no rate increase at the onset of the program. However, in 2017, the typical residential gas heating customer who uses 1,010 therms annually is expected to see an increase of $0.49 on their average monthly bill.

At the end of the Gas System Modernization Program, the same residential customer is projected to see a total cumulative increase of $4.82 on their average monthly bill, or an increase of approximately 1.5 percent annually over four years.

Under the agreement, PSE&G will earn a return on equity of 9.75 percent on $650 million of investment based on an accelerated recovery mechanism, and will seek to recover the remaining $255 million in a base rate case, to be filed no later than November 1, 2017.