On July 19, the New Jersey Board of Public Utilities (BPU) issued an order directing utility companies to provide refunds of certain deposits retained by utilities for main extension construction to comply with prior rulings by the Appellate Division. The Appellate Division’s rulings, made in 2009 and 2012, concerned revisions that the BPU had adopted in 2004 to its Main Extension Rules, which substantially departed from prior regulatory schemes. These revisions limited refunds for the construction of extensions for utility services to only “areas designated for growth” (or “growth areas”) set forth in N.J.A.C. 14:3-8.1 et seq. This limit on refunds was invalidated by the Appellate Division in 2009. In June 2012, after subsequent litigation, the Appellate Division ordered full retroactive application to the 2009 invalidation. The 2012 decision also required reimbursement to eligible developers whose deposits were wrongfully withheld from as far back as 2005. The July 19 order marks the BPU’s first substantial act to implement the Appellate Division’s June 2012 decision.
BPU Main Extension Rules and the Centex Appeal
For almost a century, New Jersey statutory law, N.J.S.A. 48:2-27, required regulated utilities to pay for the extension of utility service to new developments so long as the service was reasonable, the extension would provide sufficient monetary returns for the utility, and the utility could reasonably afford to provide the extension. This all changed in 2004, when the BPU revised the Main Extension Rules, N.J.A.C. 14:3-8.1 et seq. The revisions took effect in March 2005 and prohibited public utilities from paying for or financially contributing to the cost of utility extensions that were not located in designated growth areas, as defined by the State Planning Commission in the New Jersey State Development and Redevelopment Plan (the “state plan”).
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