Under existing Board of Public Utilities Rules, developers seeking to build in undeveloped areas have been forced to bear the full cost of utility extension, while developers building in more developed, metropolitan areas, have enjoyed the benefit of sharing the expense of utility extension with existing ratepayers in the area.  The rule was designed to encourage smart growth and reduce sprawl.  The result was that developers in rural and less developed areas of New Jersey were facing massive, if not prohibitive, infrastructure expenses.

After getting an $8 million bill for utility extension for a 555 home development in Howell, one developer sued the BPU, challenging its authority to adopt such a rule, codifying disparate treatment of developers based on the existing development and infrastructure in a given area.  The Appellate Division ultimately ruled that such a rule, treating development in some areas of the state differently than others at the developer’s expense, is beyond the state agency’s statutory authority.

In response to the Appellate Division’s opinion, the BPU has introduced a new rule, still in draft, that would allow developers to share the cost of utility extension over the entire ratepayer base.  The new rule will make large-scale development in rural areas possible, and offers the possibility of utility service to both new and existing homeowners and businesses in these areas.  The details of the new rule’s implementation will be discussed at the BPU’s meeting on Tuesday, October 18, 2011, including what portion of the extension costs should continue to borne by the developer and whether the developer should pay a deposit for the extension.  Developers with plan to build in areas that are not served by existing infrastructure, or in rural areas may want to consider attending the meeting or contacting a BPU stakeholder to express support for the proposed rule.  The meeting is expected to draw critics of the proposed rule who argue that it will lead to sprawl, compromise smart growth, and endanger scarce resources.  To review a copy of the draft rule, click here.