BPU 2015 Revised Rules Eliminate Smart-Growth Service Extension Distinction

On Dec. 21, 2015, the Board of Public Utilities’ (BPU) revised Main Extension Rules, N.J.A.C. 14:3-8.1 et seq., became effective, thereby eliminating the distinction between extensions of service in “smart growth” areas and areas not designated for growth. Since 2005, the BPU had used this distinction to determine whether a developer could receive a reimbursement for utility service extension costs. In addition to allowing refunds for service extensions in non-smart-growth areas, the 2015 revised regulations create a mechanism for refunds for the period 2005-2009.

Legal Background

N.J.S.A. 48:2-27, which was enacted in 1911, requires the BPU to order utilities to make or pay for extensions of service that: (1) are reasonable and practicable; (2) are reasonably warranted by the financial condition of the public utility; and (3) will furnish sufficient business to justify the construction and maintenance of same. Prior to 2005, regulated utilities were thus required to reimburse developers and homeowners throughout New Jersey for utility service extension costs; regulated utilities did this by utilizing the revenue generated from those extensions. However, on March 20, 2005, the board revised its Main Extension Rules, which governed whether and how a regulated entity could contribute financially to a service extension. N.J.A.C. 14:3-8.1 et seq. The Main Extension Rules were phased in over the ensuing period and, after Jan. 1, 2007, the Main Extension Rules prohibited utilities from paying for or financially supporting extensions of service to “areas not designated for growth.” N.J.A.C. 14:3-8.6. Under these rules, designated smart-growth areas included the following: Metropolitan Planning Areas; Suburban Planning Areas; a designated center; an area identified for growth as a result of a petition for municipal plan endorsement approved by the State Planning Commission; a smart-growth area and planning area designated in a master plan adopted by the New Jersey Meadowlands Commission; or a Pinelands Regional Growth Area, Pinelands Village or Pinelands Town.