New Jersey § 48:3-61

§ 48:3-61.

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.