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PUBLIC SERVICE ELECTRIC AND GAS COMPANY (PSE&G) SAYS PROPOSED CONTRACT WITH BAYWAY REFINERY WILL SAVE RESIDENTIAL CUSTOMER $25 MILLION

 NEWARK, N.J., Aug. 30 /PRNewswire/ -- Public Service Electric and Gas Company (PSE&G) said today its proposed contract with the Bayway Refinery will protect residential customers from bearing the $25 million burden that would result from losing Bayway to another supplier.
 Robert J. Dougherty, PSE&G senior vice president-electric, said keeping Bayway on the PSE&G system "is in the best interests of all customers, especially residential customers, and taxpayers of the state of New Jersey." Dougherty explained that the Bayway facility now contributes more than $25 million of the fixed costs involved in providing all customers with service and pays more than $5 million in gross receipts and franchise taxes to the state. "The fixed costs will remain if Bayway leaves the PSE&G system," Dougherty said. "The $25 million ultimately will be paid by remaining customers, including residential customers and small businesses. In addition, the state would lose all of the tax revenue. The only entity that would come out ahead would be the developer of the nonutility power plant that would serve the refinery. This doesn't make economic sense and is also unfair."
 The New Jersey Board of Regulatory Commissioners (BRC) today began hearings on PSE&G's proposed contract with the Bayway Refinery located in Linden, N.J. Under the plan, Bayway will provide PSE&G with refinery gas from the facility which will be converted into electricity. Bayway will be charges a fee for the conversion service. When the value of the gas is included, the net result will be a reduction of approximately $9 million in Bayway's annual energy bill.
 Dougherty said PSE&G is aware that Bayway, like many other industrial concerns, is under increasing competitive pressure and must find ways to reduce costs. In August, 1992, the facility qualified for a more economical rate which reduced the annual electric bill by approximately $2 million. When Tosco Corporation purchased the refinery from Exxon in April, 1993, it made it clear that the facility's viability depended on a further reduction in energy costs. Bayway indicated that if PSE&G could not find ways to reduce electric costs it would leave the PSE&G system and supply its own power, either directly or in conjunction with an independent power producer.
 "PSE&G, its customers, and the state's taxpayers all have a stake in keeping Bayway on the PSE&G system," Dougherty said, "and all would share in the costs of implementing the proposed contract." He said PSE&G would forgo approximately $4.8 million in pre-tax earnings, which includes the impact of shifting the facility to the more economical rate; electric customers would pay approximately $2.46 million in higher fuel adjustment charges, and gross receipts and franchise tax payments to the state would be reduced by approximately $2.2 million. For the typical residential customer, the contract would result in a monthly electric bill increase of four cents. If Bayway leaves the PSE&G system, residential electric customers would experience a monthly increase of 32 cents.
 Dougherty said the Bayway issue illustrates the fact that independent power producers and cogeneration companies enjoy significant tax and regulatory advantages that provide them a lucrative competitive edge in serving large industrial customers, while putting residential customers at risk.
 Independent power producers (IPPs), cogenerators, and their customers do not pay the 13.5 percent gross receipts and franchise taxes that all utility customers pay; they don't pay sales tax on the electric generating equipment they purchase, and their generating equipment also is exempt from local property taxes. In addition, IPPs and cogenerators are exempt from the state's Certificate of Need scrutiny that utilizes must comply with for building or expanding electric generating facilities.
 Dougherty said, "PSE&G believes that all customers in New Jersey should be able to benefit from a competitive energy marketplace." PSE&G, he said, continues to cooperate with the BRC and other energy suppliers on creating a more equitable energy supply system in New Jersey. While these discussions are under way, he said, residential customers remain at risk at having to bear the financial burden of the current inequitable system. "The Bayway contract will protect residential rate payers from this impact and will also mitigate the loss of tax revenue for the state. These results are clearly in the public interest."
 -0- 8/30/93
 /CONTACT: Neil Brown, corporate communications of PSE&G, 201-430-6017/
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CO: Public Service Electric and Gas Company ST: New Jersey IN: UTI SU: CON

SH-SM -- NY031 -- 7030 08/30/93 10:48 EDT
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Date:Aug 30, 1993
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