Market transition charge for stranded costs
N.J. Stat. § 48:3-61
in effect13. a. The provisions of R.S.48:2-21 or any other law to the contrary notwithstanding, and simultaneously with the starting date for the implementation of retail choice as determined by the board pursuant to subsection a. of section 5 of this act, the board shall, pursuant to the findings made in connection with the stranded cost filing under subsection c. of this section and the related stranded costs recovery order, permit each electric public utility the opportunity to recover the following categories of costs through a market transition charge that shall be collected as a limited duration non-bypassable charge payable by all of the electric public utility's customers, except as provided pursuant to section 28 of this act: (1) Utility generation plant stranded costs; (2) Stranded costs related to long-term and short-term power purchase contracts with other utilities, including buydowns and buyouts of such contracts and interim debt, the issuance of which has been approved by the board, issued to effectuate the buydown or buyout of such contracts; (3) Stranded costs related to long-term power purchase contracts with non-utility generators, including buydowns and buyouts of such contracts and interim debt issued to effectuate the buydown or buyout of such contracts, and the costs of new power contracts approved by the board which are the result of the renegotiation, restructuring or termination of previous non-utility generator power purchase contracts pursuant to subsection l. of this section; and (4) Such restructuring related costs, if any, as the board determines to be appropriate for recovery in a market transition charge. b. Costs that may be collected pursuant to subsection a. of this section must be otherwise unrecoverable as a direct result of the implementation of retail choice mandated by subsection a. of section 5 of this act. c. In order for an electric public utility to have a market transition charge established it must submit a stranded cost filing to the board, the elements of which are to be established by the board. After notice and hearing, the board may approve, reject or approve with modifications the filing as it deems necessary and appropriate to comply with the provisions of this act and shall thereafter issue a stranded cost recovery order setting forth the amount of stranded costs, if any, eligible to be recovered by such electric public utility. The order or a successor order also shall set forth the board authorized mechanism to be used by the electric public utility for recovery of stranded costs which the board has determined are eligible for recovery. d. Costs that may be eligible for recovery pursuant to paragraphs (1) and (2) of subsection a. of this section must have been committed to by the utility and included in rates through the conclusion of the utility's most recent base rate case prior to April 30, 1997, except that the board may determine certain costs that were not previously included in base rates to be eligible upon a showing by the utility that such costs were prudently incurred and either: (1) were needed to maintain plant integrity, performance or reliability or to meet safety, environmental or other regulatory standards consistent with the utility's obligation to serve; or (2) in the case of major investments or major upgrades not meeting the standard in subsection a. of this section, the utility demonstrates that it had no more cost-effective power supply source available at the time the commitment was made to meet their energy consumers' needs consistent with applicable board standards and to provide benefits to ratepayers. e. For the purposes of quantifying the magnitude of stranded costs eligible for recovery via the market transition charge, the board shall require the electric public utility to demonstrate the full market value of each eligible generating asset or power purchase commitment over its remaining useful life or term and, in fixing the level of the market transition charge, the board shall reach a determination as to the market value of such eligible assets and commitments, or implement a mechanism for such value to be determined. Such determination or mechanism shall reflect or provide a means to reflect the full value of the eligible asset or commitment, including value which may not be realized by the electric public utility until after the expiration of the market transition charge, and may reflect a reduced return, if any, on investment in quantifying stranded costs which the board determines to be reasonable given the changes in capital costs or risks to the utility, or to reflect the impaired value of the uneconomic generating assets to ratepayers. f. For the purposes of quantifying the magnitude of stranded costs eligible for recovery via the market transition charge, the board shall require or impute all reasonably available measures for the electric public utility to mitigate the quantity of stranded costs, by: (1) Reducing the cost of power purchase commitments and the on-going capital and operations costs of the generating plant; (2) Maximizing the market value of the generating asset or purchase commitment; or (3) Undertaking other reasonably achievable cost reductions. g. The board shall conduct a periodic review and, if necessary, adjust the market transition charge or implement other ratemaking mechanisms in order to ensure that the utility will not collect charges that exceed its actual stranded costs. Net proceeds from the sale or lease of generating assets as provided in subsection d. of section 11 of this act or from the offering of competitive services by the electric public utility or a related competitive business segment of the public utility as provided in subsection b. of section 7 of this act, shall be reflected on a timely basis in the first instance by the adjustment of the market transition charge or equivalent rate mechanism implemented pursuant to this subsection. Any adjustment mechanism shall reflect changes in market price and may reflect other factors such as changes in sales. h. Notwithstanding the provisions of subsection a. of this section, the board shall not determine a level for the market transition charge for recovery of a utility's eligible stranded costs, as determined in accordance with this section, which prevents the achievement of the rate reductions required pursuant to section 4 of this act and that such rate reductions will not impair the electric public utility's financial integrity such that access to the capital markets for the continued provision of safe, adequate, and proper utility service is impaired. i. The market transition charge for each utility shall be limited to a term not to exceed eight years, except that the board may extend the term of the charge to allow a utility: (1) To recover the non-mitigable stranded costs associated with payments under long-term power purchase contracts with non-utility generators over the lives of the contracts; (2) To recover costs associated with a particular generating asset, the costs of which represent at least 20 percent of an electric public utility's stranded costs as determined by the board and the remaining life of which for depreciation purposes at April 30, 1997 was 10 years or greater, in which case the board may extend the market transition charge up to three additional years if necessary to achieve the rate reduction levels established by the board pursuant to section 4 of this act; or (3) To achieve the mandatory rate reductions established pursuant to subsection d. of section 4 of this act if the board determines that such mandatory rate reductions cannot be achieved by a public electric utility absent such extension. j. The board shall issue orders with respect to each electric public utility's amortization of stranded costs through the market transition charge pursuant to this section prior to the starting date for implementation of retail choice as provided in subsection a. of section 5 of this act. k. Nothing in this act shall be construed to alter non-utility generator power purchase contracts in existence on the effective date of this act or the board's orders approving said contracts. l. (1) The board may approve the buyout or buydown of a power purchase agreement with a non-utility generator or a new power purchase contract which is the result of the renegotiation, restructuring or termination of a previous non-utility generator purchase agreement, if it determines that such buyout, buydown or new contract, including any and all transaction costs, will result in a substantial reduction in the total stranded costs of the utility, which resulting savings will be passed through to ratepayers on a full and timely basis. (2) Each electric public utility shall be permitted to recover the costs of qualified replacement power on a full and timely basis pursuant to section 9 of this act. (3) Each electric public utility shall be permitted to recover on a full and timely basis through the market transition charge: (a) all costs of power contract buydowns and buyouts approved by the board which are the result of the renegotiation, restructuring, buyout, buydown or termination of existing non-utility power purchase contracts; and (b) debt issued to effectuate the board-approved renegotiation, restructuring, buyout, buydown, or termination of existing non-utility power purchase contracts. (4) The board's approval of any contract renegotiation, restructuring, buyout, buydown, termination or new contract shall not be subject to modification except as requested jointly by the parties to such contracts. (5) As used in this subsection, "qualified replacement power" is power that the utility purchases subsequent to the board-approved buyout, buydown or renegotiation of a non-utility generator power purchase contract which is necessary to provide basic generation service and in order to replace power not provided as part of the buydown, buyout or new contract, and which is obtained at a cost no higher than that which is available in the market. L.1999,c.23,s.13.
Source: Open US Law by Vaquill AI (CC BY 4.0)URL: https://www.njleg.state.nj.us/legislative-activity/statutesFetched: 10/17/2026