Electric Bills Skyrocket
No doubt, between your home and your business, you have noticed the big jump in electric bills across the state. Though this increase was announced months ago, it didn’t receive too much coverage or attention among the public until this summer, when everyone opened their bill and was shocked and angry.
We regularly speak with elected officials in Trenton, as well as their staff, and it’s clear that utility bills have suddenly become one of the biggest issues in this election campaign, and Democrats are quite worried about it.
Even before this rate hike, New Jersey had the 12th highest electricity rates in the US, to go along with our high income taxes, property taxes, gas taxes, and corporate business tax. The Board of Public Utilities (BPU), staffed by Gov. Murphy’s appointees, approved rate increases for the utility companies of between 17%-20% year over year.
New Jersey is part of a large regional power grid called PJM, that runs west through Chicago and south through Virginia. The electricity we generate in the state gets put on that grid, and all of our demand is serviced by the overall regional grid. The fundamental reason for the price increase is the same reason that explains most price increases—there is more demand for electricity than there is supply. And since that imbalance is expected to get worse, PJM’s operators want to signal to companies that they need to create more power plants.
Less than a decade ago, NJ generated enough power to meet all of our demand, thanks to an expansion of natural gas generation. Natural gas is much cleaner than coal, and advances in fracking technology caused the price to plummet.
That began to change when Governor Murphy took office in 2018. His Administration has enthusiastically promoted an “all electric” future without fossil fuels. In 2019, he adopted an official “Energy Master Plan” which made it the goal of the State of New Jersey to completely stop the use of natural gas for electricity generation by 2035, despite the fact that it made up half of our supply generation (almost all the rest comes from the nuclear plants in Salem County, solar is under 10% of the total). He recommitted to this goal at the beginning of the year, saying he wanted the Legislature to codify his goal into statute and ban new natural gas generation.
As you can imagine, having the Administration set this as their official goal was a strong disincentive for companies to build new natural gas power plants to replace the ones that regularly age out of the fleet. Our total electrical generating capacity has dropped 12% in the years since.
Murphy blames an unexpected increase in demand due to the construction of more and more power-hungry data centers across the region to run AI models, cloud storage, and crypto mining. While that has been a factor very recently, it doesn’t come close to explaining or excusing this shortfall. That’s because this Energy Master Plan not only called for the elimination of natural gas from power generation, but the elimination of natural gas from heating and cooking, the elimination of heating oil usage, and the elimination of gasoline and diesel from transportation, all within about 25 years.
By his own estimates, this would have doubled the total electricity demand in the state, and that’s before accounting for things like population growth over that period. So he planned to double electric demand while simultaneously cutting electric generation in half with his natural gas ban.
So where was all the power supposed to come from? Shouldn’t he have been expanding generation capacity to meet these lofty goals?
He effectively bet it all on offshore wind generation, vast fields of turbines along the coast. Although even that would not have been enough to meet all that demand, it could have met some, and his plan was to oversee the opening of the first fields this year, before he left office. He and his allies in the Legislature lined up hundreds of millions of dollars in subsidies, including through ratepayer-paid subsidies, to underwrite the cost of construction.
But that plan can now be judged a complete failure. While President Trump has recently put the nail in the coffin for offshore wind all over the country (including revoking the coastal permits), these plans collapsed a year before he was even elected, owing to a combination of cost overruns from inflation and high interest rates.
Other Democrats are trying to pin the blame on Trump, but these cost increases are the result of years of poor planning. Maybe there will be reasonable blame for some portion of future increases years from now, due to tariffs and the elimination of some forms of subsidies from the federal government, but not for the rates we’re seeing now.
Other Democratic legislators are looking to mandate that new data centers generate their own clean electricity in order to operate in NJ, but because we’re part of a regional grid the likely outcome of that bill would be that the data center will open in a place like West Virginia, generate the same demand, and NJ will be in the same spot from a rate perspective but without even the local tax revenue it could have had.
Congresswoman Sherrill, the Democratic nominee for governor, is saying she will call a state of emergency and freeze electric rates from increasing further. You can tell just how big this issue is because it’s the spotlight of her first television ad for the general election. Her plan was hurt, however, when Gov. Murphy came out and said it wouldn’t work (after all, if it would, then why isn’t he doing it now?).
On overall energy policy, Sherrill has been deliberately vague, not wanting to upset her left flank but also not wanting to commit to unpopular Murphy mandates if she can avoid it.
Republican Jack Ciattarelli, however, has been consistently fighting Murphy’s Energy Master Plan since it was announced, and is vocal about the need for new natural gas generation to start coming online as soon as possible.
The best the BPU has been able to come up with is to take some ratepayer money and give homeowners a $100 reprieve, spread over three months. It’s worth noting this move is only for homeowners, not businesses, which is a concerning trend we’ve seen from this Administration. They increase costs across the board and then give out targeted subsidies that leave businesses out. Businesses, for example, provide about half of all property tax revenue collected in this state, and yet the various programs like StayNJ and ANCHOR only provide checks to homeowners, further increasing costs in the state and removing the pressure on policymakers to engage in needed reforms. We have been raising this point to legislators more and more, to remind them of how little they do for business.
Business groups, including NJGCA, have been warning about the downsides of the Governor’s energy plans the full 8 years he’s been in office, and he’s refused to change course and the Democratic Legislature has refused to force him to change course.
Now we’re hearing that it could get worse next year. Less so from a rate perspective, but instead we could start seeing brownouts during the summer. This would be an even bigger problem if Sherrill’s rate freeze did go into effect—if power companies cannot meet grid demand, they’ll funnel what they can to the places willing to pay for it.
Regular brown outs are not just an inconvenience, they’re crushing for businesses that need electricity to stay open and keep people employed. Whatever type of business you have, if you don’t have any kind of backup power, you may want to talk to an electrician about potentially installing some in the coming months, whether to keep the doors open or just as an emergency reserve to prevent things like food spoilage. Don’t assume you can just buy a diesel generator for a few hundred bucks at the hardware store and stay in operation, depending on your power needs you may need a more elaborate system. Those small generators have been known to short-circuit pumps and dispensers. If you have a gas station, you’ll be able to stay open and sell fuel to those who need it to power their own home generators.
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