Home » Why you can’t switch your utility company

Why you can’t switch your utility company

by Amie Rukenstein

Editor’s note: I wrote this in March of 2018, before I was affiliated with MercerMe. It seems like a good time to replay it since nothing has changed.

In the wake of our two recent nor’easters, I started wondering how the Hopewell Valley came to have two power companies.

As the map below indicates, there are four power companies that service New Jersey. As you can see, PSE&G,

in orange, covers almost all of Mercer County, but JCP&L’s territory takes the area west of Route 579.[1] How this came to be is anyone’s guess.

I recently spoke to Dr. Frank Felder at Rutgers’ Edward J. Bloustein School of Planning and Public Policy. He explained that the regions probably date back to the 1950s.

“There probably were some mergers and negotiations and, over time, a decision was made that this is what the borders would be. The companies themselves probably don’t know any more how it got to be this way,” said Dr. Felder.

But, you may ask, wasn’t there deregulation in the 90’s so there wouldn’t be this kind of monopoly? The answer is yes and no. Now, consumers can choose their power supplier, but energy consumption is a spider’s web of markets and roles. The ability to choose your supplier doesn’t mean there is a free market.

Historically, there were three components to how electricity was transferred from where it is created to your house:

  • Generation: the company that makes the power [2],
  • Transmission: the lines and the transformers, and
  • Distribution: what the local companies like PSE&G and JCP&L do.

Until the late 20th century, these roles were generally filled by monolithic companies that built big power plants to serve many thousands of customers. [3] But, in the 1990s, the Federal Energy Regulatory Commission (FERC) deregulated the industry and, as a result of that and technology improvements, new companies, called suppliers, sprang up to purchase the power from the distributors and supply it to consumers. According to Dr. Felder, the benefit of this is that before, if a company took a risk and built a big power plant that turned out to be a bad investment, it shifted the risk to the ratepayers (you and me). With deregulation, the third-party supply companies take the risk, which theoretically keeps prices lower for the consumers. [4]

So, now, on your bill, you will see costs of both distribution and supply, and you can choose your supplier, who can be a third party company who will promise to save you some money. They can’t help you with reliability though – that is up to the distributor.

So why can’t we switch our distributor?  Because physically, it just isn’t possible. Each power company maintains its own power lines. If everyone in Hopewell could choose either JCP&L or PSE&G, the companies would have to lay two completely separate sets of lines, transformers, and substations through the town.[5]

Would solar panels help?  Dr. Felder says probably not. While solar panels are great and will lower your energy cost, they don’t help you in a power outage because the distributor will turn off all the lines so that a backflow from your house doesn’t go back into the system and kill a lineman. You could have solar panels with a battery system to store the energy but, as Dr. Felder explained, that is very expensive.

What can we do? Governor Murphy spoke yesterday (3/9/18) about keeping the utility companies accountable. Letters and phone calls to both the Governor and BPU can only help. And, Dr. Felder suggested, that towns and residents can double-down on tree-trimming.

“Keeping those big trees away from the power lines is the best way to protect the power lines,” he said.

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