New Jersey Utilities Board Approves Consultant Study to Explore Rate-Cutting Business Models

The New Jersey Board of Public Utilities this week approved hiring a consultant to examine alternative utility business models aimed at reducing electricity costs for customers across the state.

The consultant will evaluate various regulatory reforms, including performance-based ratemaking that ties utility profits to outcomes like reliability and customer savings rather than traditional spending-based models, according to the board’s announcement. The study will also examine multi-year rate plans, reductions to utility returns on equity, least-cost resource testing, and securitization tools.

“The BPU is committed to Governor Sherrill’s affordability agenda and is looking at every opportunity to drive down electricity rates,” said NJBPU President Christine Guhl-Sadovy. “This study will result in a concrete plan to address how the utility business model can better serve customers throughout the state.”

The analysis stems from Governor Sherrill’s first executive order, signed January 20, which gave the board 180 days to complete the study. The order represents part of the administration’s response to what it calls an electricity affordability crisis affecting New Jersey residents.

Electric delivery charges, which cover the poles, wires and infrastructure that transport power to homes and businesses, have steadily increased according to the board. Combined with rising supply costs related to the PJM capacity auction, electricity bills have become unaffordable for many residents, the board stated.

The study aims to determine how much of the rate increases result from current utility regulation methods and what alternative approaches might mean for future customer bills. The board emphasized that the study will not immediately change rates but instead will provide data-driven options to reduce long-term bill pressure while maintaining safe, reliable service.

The board approved the request for qualifications during its regularly scheduled agenda meeting Wednesday as part of the Sherrill administration’s broader effort to address rising electric costs from multiple angles. The resulting study will focus on whether the underlying utility business model requires fundamental changes.

The action follows the board’s response to Sherrill’s second executive order, issued earlier this month, which directed the state’s four electric distribution companies to explore grid modernization opportunities. Atlantic City Electric, Jersey Central Power & Light, Public Service Electric & Gas and Rockland Electric Company received requests for information about improving electric grid efficiency and accelerating distributed energy resource connections.

That request for information, signed January 20 on Sherrill’s inauguration day, requires the electric distribution companies to provide comprehensive written responses within 30 days. The responses must address compliance with interconnection regulations, opportunities to improve efficiency, and strategies to support distributed energy resources development on constrained circuits.

While the PJM price collar has kept supply rates relatively stable, the board continues examining all customer costs to advance affordability goals. The consultant study represents a longer-term approach to addressing rate concerns by potentially restructuring how utilities operate and earn profits.

The board seeks to identify which combination of regulatory changes offers the greatest long-term savings for ratepayers while providing industry certainty and encouraging investments necessary for system reliability. The study will examine whether performance-based models that reward utilities for achieving specific customer benefits could replace traditional rate-setting approaches that primarily compensate utilities based on capital expenditures.

The consultant selection process will determine which firm will conduct the comprehensive analysis of New Jersey’s utility regulatory framework and recommend potential reforms to reduce electricity costs for customers statewide.