New Jersey Was Hoodwinked by the Deregulation Shell Game

By State Senator Bob Smith (D-17)


Recently, utility customers throughout New Jersey were startled to learn that the New Jersey Board of Public Utilities approved a 15.1 percent rate hike for Public Service Electric & Gas residential customers, and is considering 11.5, 25, and 16 percent increase for Jersey Central Power & Light and Rockland Electric, and Connectiv customers respectively.  New Jersey will now have the 11th highest electric rates of all 50 states, nearly 32 percent above the national average.  So much for deregulation keeping rates down through the free market=s iron hand!


Back when deregulation was voted on in 1999, many of my Democratic colleagues in the legislature and I vocally argued, to no affect, that deregulation was a quick fix that would hurt ratepayers in the long run.  Residents can now see that the rate-reducing benefits of deregulation, so widely touted by Governor Christie Whitman and it=s Republican sponsors in the legislature, Senator Peter Inverso and Assemblyman Paul DiGaetano, was really just a fancy shell game designed to fool voters into believing that their administration was actually doing something to control rising utility rates.


The basic idea behind the deregulation regime was simple and enticing.  Utilities agreed to discount electric rates for four years, with the understanding that they could apply for any needed rate increases when this grace period ended.  It was believed that by deregulating the market, within these four years competition among power generators would lead to more efficient and less costly production, thus passing on the savings to consumers.


This obviously did not happen.  Only a few new companies entered the bidding process, and even fewer actually made any real effort to adapt new and significantly more efficient technology.  While we are not suffering from the truly astronomical rate hikes and rolling blackouts affecting other states such as California, by allowing utilities to assume new debt to cover the temporary rate reductions, the average consumer will be paying far more than they would be if deregulation never happened.


This is a classic policy snafu that should never have happened in the first place.  It is yet another example of how the Whitman adminstration and their consorts in the legislature at the time sold out the state for temporary, short term political gains without any consideration for the long term consquenses. 


As with the tremendous budget deficit caused largely by overbonding, we must now move quickly and make difficult sacrifices in order to bring the situation under control.  For example, one of the best ways that have been proposed to reign in utility prices is to rapidly install more energy efficient products wherever possible, whether they be dishwasher for our homes, computers for our workpaces, or traffic lights for our streets.  This will not be cheap, but it is necessary in order to serve the greater good.


As responsible policy-makers, we have a duty to look out for more than our own short term political interests.  What is in the long term interests of the entire state should be what is important.  The former is a mindset that we have been far to willing to let ourselves fall into.  We were once fooled once by the blinding glare of smaller electric bills, but we should not let ourselves be hoodwinked again.


Bob Smith is a State Senator representing Piscataway, New Brunswick, Highland Park, Franklin Township, North Brunswick and Milltown.  He is a member of the Senate Environment and Judiciary Committees and has served as a member of the legislature since 1986.