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BACKGROUND ON PSE&G'S RATE FILING; COMMENTS BY LAWRENCE R. CODEY, PSE&G PRESIDENT

              BACKGROUND ON PSE&G'S RATE FILING;
        COMMENTS BY LAWRENCE R. CODEY, PSE&G PRESIDENT
    NEWARK, N.J., Nov. 14 /PRNewswire/ -- Public Service Electric and Gas Company (PSE&G), for the first time in six years, has filed a request to increase base rates for electric and gas service.
    PSE&G President Lawrence R. Codey, said:
    "I fully recognize that, no matter how infrequent, the prospect of higher prices is never pleasant for customers, especially at a time when the economy is in slump.  PSE&G's current $669 million request would raise electric and gas bills 15.95 percent and 12.45 percent, respectively, for residential customers.  These new rates would probably not go into effect until September 1992, but there is no getting around the fact that this is a substantial increase, especially for low-income customers, and it's a measure the company has hard to delay.
    The company's rate petition will undergo intense scrutiny by the N.J. Board of Regulatory Commissioners and the state Public Advocate. I welcome this test because I am confident the data we have provided will provide accurately reflect the financial realities PSE&G faces in meeting its obligations to customers and investors.  Before this process gets under way, however, there are some important factors about PSE&G's rates and the rate request I want to share with customers.  I don't anticipate this information will make higher rates any more welcome; I do hope it will illustrate the point that PSE&G is acting fairly and equitably in its effort to provide excellent service at the lowest possible cost.
    PSE&G's residential customers currently pay the lowest electric and gas rates in New Jersey and rates are actually lower now than they were five years ago.  Major components of customers' bills reflect the cost of obtaining supplies of natural gas and the fuels used to generate electricity.  These costs are adjusted, usually on an annual basis, through the Levelized Energy Adjustment Charge (LEAC) for electric, and the Levelized Gas Adjustment Charge (LGAC) for gas.  On the gas side, PSE&G has worked diligently and aggressively to provide customers with savings resulting from deregulation of the gas supply market.  We've been very successful in seeking out and securing low-cost supplies of gas on the open market and I am proud of the fact that during last year's (1990-91) heating season, PSE&G refunded more than $100 million to gas customers.  The company will refund an additional $56 million to gas customers during November and December of 1991.  PSE&G's gas rates are approximately 9.5 percent lower now than they were in 1985.
    During this same six-year period, PSE&G lowered customers' electric bills by approximately 3.5 percent.  We've worked hard to keep fuel costs as low as possible by maximizing nuclear energy generation, further reducing the use of high-cost foreign oil to about 2 percent of our electric generation, using more natural gas and seeking out low-cost supplies of low sulfur coal.
    PSE&G, like other regulated utilities, is allowed to recover through base rates those operating, maintenance and administrative costs associated with safety and reliably meeting the needs of its 2.2 million customers.  The company, also through base rates, earns a return on the capital invested in the plant and facilities -- the generating stations, transmission lines, substations, control centers, and gas distribution mains -- that comprise the electric and gas infrastructure in the 297 New Jersey municipalities served by PSE&G.
    Since PSE&G's last base rate case was filed, the company has invested approximately $1.6 billion in substantial improvements in electric and gas facilities.  This total includes 1,435 miles of additional gas mains, 18 electric distribution substations, 9,630 miles of electric distribution lines, and 18 miles of transmission lines. Investors who have placed their faith and their dollars with the company deserve to earn a fair return and it is important that the individual investor as well as the investment community maintain confidence in our company if we are to continue to attract the capital necessary for maintaining and upgrading facilities.  Loss of confidence in PSE&G as a sound investment would result in higher capital and financing costs, and ultimately, still higher rates for customers.
    From 1985 to the 1991, the rate of inflation as measured by the Consumer Price Index has increased 30 percent, well above the 13.6 percent increase in revenues we are now seeking.  PSE&G employees have worked extremely hard, and have been successful in holding the line on costs despite inflationary pressures that affect all businesses. We are now serving 200,000 more customers than in 1985 with 5 percent fewer employees.  Electric peak demand has risen from 7,721 megawatts in 1985 to 9,085 megawatts in 1991 and peak gas sendout has risen from 17.8 million therms to 21.8 million therms during the same period.
    While meeting the challenges imposed by increases in demand as well as our obligation to provide reliable service, we have also examined every aspect and function of our business to eliminate unnecessary tasks and find more efficient methods of operation.  The innovations of our employees have resulted in increased efficiency through extensive introduction of new technology such as advanced computer controls and automated systems.  PSE&G, for example, has become an international leader in introducing advanced, money-saving robotics into the workplace.
    A significant portion of the overall revenue request, approximately $230 million, results from mandated annual expenditures over which PSE&G exercises limited authority.  These include implementation of an environmental remediation program at the sites of former gas manufacturing plants, revised depreciation rates for electric and gas facilities, funds set aside for the future decommissioning of nuclear generating stations, and required accounting changes.
    The purpose of utility company regulation is to protect and balance the interests of rate payers and shareowners.  Our customers deserve to know that PSE&G is being managed efficiently and that the expenditures made in providing service are prudent and necessary.  Investors deserve a fair and reasonable return on their dollars.  I am confident that a careful examination of the rate petition filed on Nov. 14 clearly leads to the conclusion that the revenue request is consistent with both these objectives.  PSE&G has held the line on costs, its customers pay the lowest residential electric and gas rates in New Jersey, and it has passed on savings to customers through lower rates.  As I said earlier, nobody likes to pay higher prices.  In the case of PSE&G's rate request, however, they are justified.
    -0-       11/14/91
    /CONTACT:  Neil Brown of PSE&G, 201-430-6017/
    (PEG) CO:  Public Service Electric and Gas Company ST:  New Jersey IN:  UTI SU: JT-SM -- NY078 -- 4553 11/14/91 16:13 EST
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Publication:PR Newswire
Date:Nov 14, 1991
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