N.J. Admin. Code § 14:4-4.5

Current through Register Vol. 56, No. 19, October 7, 2024

Section 14:4-4.5 - Service agreements

(a) An electric or gas public utility shall obtain Board approval prior to entering into a service agreement.

(b) An electric or gas public utility shall notify the Board in writing of all modifications to any approved service agreement, including the provision of services to a non-affiliate, and additions or deletions to the categories of services provided under the service agreement.

(c) An electric or gas public utility shall obtain Board approval for any modification to cost allocation methodologies and formulae, which would result in a five percent or greater change in allocation factors. The filing should be submitted at least 60 calendar days prior to the proposed effective date of the modification. The filing shall include the following:

1. All allocation formulas, supporting work papers, and a complete list and description of the services and operations covered by the service agreement; and

2. A comparison of the budget under the existing service agreement and a pro-forma budget under the new service agreement, showing service company costs and charges that will apply to the electric or gas public utility.

(d) Subject to such approvals as required in (c) above, if a public utility holding company system adds or removes a party to a service agreement, the electric or gas public utility shall ensure that the following occurs within 60 business days after such addition or removal:

1. Cost allocation factors are adjusted to reflect the addition or removal of participants at the time service commences or ends, as applicable;

2. Payment by the new participant begins; and

3. Adjustments are made for the electric or gas public utility's share of service company costs to reflect contributions from the new participant.

(e) An electric or gas public utility or its public utility holding company shall notify the Board no later than 10 business days after it receives notice that FERC or any other Federal or state agency has rendered a decision having an impact on a service agreement that the Board has approved or that is pending before the Board.

(f) For ratemaking purposes, an electric or gas public utility shall:

1. Apply to any assets not acquired by the electric or gas public utility, but intended for its use, the same capitalization, expense and depreciation policies that the Board has determined apply to assets acquired directly by the electric or gas public utility; and

2. Apply to assets acquired on behalf of the electric or gas public utility for its use, the rate of return authorized in the electric or gas public utility's most recent base rate case, unless the company acquiring the assets on behalf of the electric or gas public utility finances, or otherwise obtains the assets at a lower cost than the electric or gas public utility could otherwise obtain them. In such a case, the lower cost shall be reflected in service agreement billings to the electric or gas public utility, and the electric or gas public utility shall pass the resulting benefit on to its ratepayers.

(g) An electric or gas public utility shall not purchase or contract for any product or service otherwise covered under a service agreement that the electric or gas public utility can provide for itself or can procure from another company on more advantageous terms. The determination as to whether to refuse to purchase or contract for any product or service covered under the service agreement shall take into account all relevant factors, including, but not limited to, price, qualifications of the alternative provider, contract terms, quality of the product or service provided, and the efficiency, timeliness, and convenience of delivery or provision of the product or service. The determination above as to whether to refuse to purchase or contract for any product or service covered under the service agreement shall in no way limit the Board and/or Board staff from independently reviewing those activities. An electric or gas public utility shall not be required to take action that would result in a conflict of interest, violation of applicable law, or breach of any pre-existing contractual arrangements.

(h) An electric or gas utility or its designee shall review its purchases and contracts for any service under a service agreement beginning every three years after April 6, 2009, for compliance with (g) above. All reviews shall be documented and shall be provided to the Board and/or Board staff upon request.

(i) Nothing in (g) above shall apply to corporate governance or other activities, such as senior management services, treasury/finance functions, legal, system security and shareholder and external relations. These services shall continue to be subject to the review by Board and/or Board staff to ensure just and reasonable rates.

(j) A public utility holding company system shall not penalize an electric or gas public utility for any refusal of services under (g) above.

N.J. Admin. Code § 14:4-4.5

New Rule, R.2009 d.110, effective 4/6/2009.
See: 40 N.J.R. 1616(a), 41 N.J.R. 1500(a).
Recodified from N.J.A.C. 14:4-4A.5 by R.2012 d.091, effective 5/7/2012.
See: 43 N.J.R. 1150(a), 44 N.J.R. 1534(a).