State regulators gave Public Service Electric and Gas Company (PSE&G)(NYSE: PEG) final approval to begin offering $105 million in loans to help finance the installation of solar systems throughout its electric service area in and around New Jersey.
Initially the program will only be available to non-residential customers. PSE&G still needs approval from the NJ Department of Banking and Insurance to provide direct loans to residential customers. There are also plans to review residential loan documents with a group of stakeholders before the program is offered to residential customers.
"Now that the Board has approved our proposal, we will move as quickly as possible to begin offering solar loans to developers and customers," said Ralph LaRossa, president and COO of PSE&G.
Filed with the New Jersey Board of Public Utilities (BPU) last April, the innovative proposal calls for the development of 30 megawatts (MW) of solar power, designed to fulfill about 50% of the renewable portfolio standards (RPS) requirements in PSE&G’s service area for the energy years 2009 and 2010. That’s enough electricity to power 24,000 homes.
The proposal was reviewed by a stakeholder working group, which included BPU staff, the Department of the Public Advocate, solar developers and installers, large energy users, and other electric and gas utilities. These discussions led to a settlement agreement. The program had received strong support from the solar industry, environmental advocates and the business community when it was first unveiled last year.
The program addresses the goals put forth by the state of New Jersy to meet 20% of the its energy needs with renewable energy by the year 2020.
The major components of the program include:
- PSE&G’s solar program will be open to all of its electric customers, including low-income, residential, commercial, industrial and municipal/governmental. The solar panels would be owned by the developer or the host customer.
- Applications will be available for two years and accepted on a first-come, first-served basis until 30 MW of projects have been developed.
- PSE&G would provide loans to developers or customers to cover approximately 40-60% of the cost of a solar installation project, depending on the projected output of the solar energy system and the cost of the system. The borrower would repay the principal, plus interest, over 10 years for residential customers and over 15 years for all other borrowers.
- The remaining project cost would be funded by the owner of the solar installation. The owner may have access to funds from banks and investors. In addition, the owner may be eligible for a federal investment tax credit. (Utilities are currently not eligible for this tax incentive.)
- Owners of solar energy systems would repay the loan with Solar Renewable Energy Certificates or SRECs, which are created every time the system generates solar electricity.
- PSE&G’s electric customers will pay for the cost of the solar program through the Solar Pilot Recovery Charge (SPRC), which will be included in the delivery part of their monthly bill. PSE&G will sell the SRECs it receives for loan repayment in an auction, and credit the proceeds from the sale to customers through the SPRC, which will offset a portion of the program costs.
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