New Jersey energy customers have a choice in their electric supplier. They can choose from among a number of competing "third party suppliers" offering a lower electric rate, or they can stay with their local utility (PSE&G, JCP&L, etc.) and be served under a backstop rate known as "Basic Generation Service" (BGS).
There are two types of Basic Generation Service in New Jersey, one for large customers, and one for small customers (small businesses and residential electric customers). The two types of Basic Generation Service are vastly different, as large customers are served on what is known as the Commercial and Industrial Energy Price (CIEP), which is an hourly market pass-through rate for electric supply that changes every hour of the day. In other words, customers pay the real-time hourly price for electricity in the wholesale market, and thus pay a different rate depending on the time of day and wholesale market conditions. This means large customers are exposed to high, volatile rates that can be double or triple the normal price when electricity demand skyrockets and more expensive, less efficient power plants are required to come online. These hourly rates are typically highest during summer and winter peaks driven by cooling/heating demand, and can lead to energy bills double or triple the normal monthly amount.
In contrast, small customers in New Jersey who buy electric supply from the utility are served on Fixed Price Basic Generation Service, and receive a flat rate for all hours of the month.
Recently, the state's Board of Public Utilities changed the threshold for separating customers between the Fixed Price BGS and Hourly-Priced BGS. Currently, customers with demands at or above 1,000 kW must take Hourly-Priced BGS, with its volatile rates, unless they choose a competing electric supplier who can offer them a fixed rate. However, starting June 1, 2011, the cutoff for Hourly-Priced BGS will be lowered to customers with a demand of at least 750 kW.
This means that some 385 Commercial and Industrial customers with a peak demand between 750 kW and 1,000 kW who used to be able to get a fixed electric price for BGS electricity supply from their local utility will now pay an hourly rate for their electric supply, unless they choose to buy from a competing third party energy supplier. These customers being forced onto hourly pricing include big box stores, supermarkets, mid-sized office buildings, and small hospitals.
However, these 385 New Jersey business customers can avoid volatile hourly rates, and save money, by switching to a competitive third party supplier. Third party energy suppliers are not required to charge these customers an hourly rate, and instead, suppliers can create custom rate plans that meet the customer's needs and can save money on the customer's electric bill.