On June 1, electricity bills for most New Jersey residents will go up

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Most New Jersey residents will spend more on electricity starting June 1. The state’s annual electricity auction for basic generation service, or BGS, is driving the uptick. According to the New Jersey Board of Public Utilities, electric bills for most residents and small to medium-sized businesses served by the four electric distribution companies will increase on an average by at least $20.

Why is there an auction?

Per state law, electric companies are required to buy at market rate the energy they need to serve customers, who do not switch to a third-party supplier.

The companies submit proposals on how they will buy electricity through the auction. Unlike the online marketplace eBay, the prices at the auction start high and decrease with each bid until suppliers are no longer willing to offer a lower bid at which they can provide adequate service.

The cost decided at auction is sent directly to ratepayers.

Who is PJM Interconnection and how much of a factor are they?

PJM Interconnection is a regional transmission organization, or RTO, that coordinates the movement of electricity in 13 states and the District of Columbia. They are also charged with maintaining the electrical grid.

The grid operator held a capacity auction last July that saw record totals, which BPU President Christine Guhl-Sadovy said was the main driver behind the auction results.

“[The] results are the culmination of several issues: rapidly increasing demand for electricity, coupled with limited supply growth due to lagging new generation interconnection, and flawed market dynamics in the PJM region,” she said.