Source: http://www.nj.com, June 20, 2016
By: Greg Wright
State energy companies are currently responsible for up to $1 billion in environmental damages, according to companies’ filings with the federal Securities and Exchange Commission.
It’s common practice for companies to recover a portion of the cost of environmental damages by increasing customers’ rates through regulator approved rate increases, filings show.
The feature is made possible through a Board of Public Utilities policy called a Remediation Adjustment Clause (RAC).
RACs allows a company to adjust its rates to recover environmental costs associated with cleanup of manufactured gas plant sites.
“In the 1980s, the state directed all utilities to assess potential impacts at Manufactured Gas Plant (MGP) sites, and in the 1990s, the BPU established a Remediation Adjustment Clause to enable New Jersey’s utilities to recover approved remediation costs,” said Michael Kinney, spokesman for New Jersey Resources.
The four New Jersey gas suppliers — New Jersey Resources, PSE&G, AGL Resources, and South Jersey Gas — all make use of RACs to procure millions of dollars worth of damages to pay for cleanup efforts.
The companies all have an interest in the proposed PennEast Pipeline project.
AGL Resources is the parent company of Elizabethtown Gas. New Jersey Resources owns New Jersey Natural Gas.
The filings, 10-K reports, show New Jersey Natural Gas is responsible for $150.9 million to $242.1 million worth of environmental remediation at five MGPs which contain contaminated residues from former gas manufacturing operations that ceased by the mid-1950s, according to the company’s filing.
“New Jersey Natural Gas is currently recovering from customers approximately $8.5 million annually,” the filing says, “and will continue to seek recovery of these costs through its remediation rider.”
“Manufactured gas was primarily used in the 1800s,” Kinney said. “The last MGP used to supply residential consumers ceased operations by the mid-1960s.”
“The remediation of MGPs is a legacy issue for gas utilities across the country, including New Jersey,” said Kinney.
AGL Resources lists six New Jersey sites with estimates of $115 million to $195 million in damages. Those sites are associated with disposal or release of substances at current and former operating sites — much of which is related to former MGP sites.
Their filing notes that, “remediation costs are generally recoverable from customers through rate mechanisms approved by regulators.”
“We primarily recover these deferred costs through three rate riders that authorize dollar-for-dollar recovery. We expect to collect $31 million in revenues over the next 12 months,” says the filing. “We recovered $40 million in 2015, $51 million in 2014 and $24 million in 2013.”
South Jersey Gas is responsible for 12 sites where they or their predecessors operated MGP sites up until the 1950s. Estimates for ongoing cleanup costs range from $124.3 million to $223.3 million – also recoverable through rate adjustments.
Since implementing their RAC in 1992, the company has recovered $106.1 million. From 2012 to 2014 the company recovered an average of $8 million per in increased rates.
Energy giant PSE&G maintains 38 former sites requiring some level of remedial action.
“PSE&G has determined that the estimated cost to remediate all MGP sites to completion could range between $431 million and $499 million,” according to their filing.
In August 2015, the BPU approved PSE&G’s petition allowing recovery of $85 million.
The filings, required annually, say that the damage costs could fluctuate based on a number of factors, including new technologies, state and federal regulation and market conditions.
Not all MGPs were owned by the current companies over the full course over their operation. Companies often acquired the plants through the purchase of other companies — meaning companies are not directly responsible for the damages caused at some of their properties.
“There are approximately 3,000 former MGPs nationwide and about 80 in New Jersey, three of which are in New Jersey Natural Gas’ service territory,” said Kinney.
“Over the past three decades, New Jersey Natural Gas has been actively engaged in investigating its MGP sites and conducting the necessary remediation as directed by the NJDEP,” he said.
“As always, the safety of the residents and surrounding communities is our top priority,” he said. “We work closely with the NJDEP to ensure compliance with all environmental regulation.”
The other gas providers did not respond to requests for comment.

MGP environmental liabilities by N.J. gas providers