On July 11, 2016, New Jersey’s Senate Committee and Energy Committee met to address an increasingly important issue: changes in the production and consumption of energy are undermining the continued viability of utilities’ current revenue models. Citing the possibility of a “utility death spiral” if action is not taken, Committee Chairman Smith convened a special stakeholder group to consider the viability of an increasingly popular revenue alternative called “decoupling.”

Under the current model, a utility’s revenue is tied to the amount of energy consumed by its customers. In the last decade; however, energy conservation initiatives combined with high energy prices and consumer-produced energy (such as roof-top solar) have led to a significant reduction in consumption and a corresponding loss in revenue. Reportedly, New Jersey’s utilities saw a loss of 10% of their revenue from 2006 to 2013 alone. Decoupling undoes the consumption-revenue link, instead adjusting rates more frequently and offering incentives to utilities to help customers reduce energy consumption. Over twenty states have already adopted some form of decoupling, as well as two New Jersey utilities – South Jersey Gas and New Jersey Natural Gas, with initial signs pointing to both consumer and utility satisfaction.

However, not everyone is interested in decoupling; a similar push in 2006 was met with strong resistance and eventually dropped. Thus, the goal of the stakeholder group, led by Sara Bluhm, Vice President of the New Jersey Business & Industry Association; Doug O’Malley, Director of Environment New Jersey; Andrew Hendry, President of the New Jersey Utilities Association; and Fred DeSanti, an energy lobbyist, will be to draft legislation that will address potential concerns – especially since the Christie Administration has not yet signaled its position on the matter.

The stakeholder group held its first meeting on August 12 and will next meet on September 18. For more information on the initiative or related concerns, please contact Grace Power, Partner at Feller Energy Law Group at gpower@fellerenergylaw.com.