Officials with the New Jersey Board of Public Utilities have challenged Butler Electric's 26% base rate increase in 2024, ruling this week that the rate hike must go through a formal review before becoming permanent.
The utilities board's March 19 decision means the rate hike, approved in August 2024 by the state’s Local Finance Board, could be reversed, with refunds issued depending on the outcome of a full review. In the meantime, customers will continue paying the higher rates.
Butler Electric, a municipal utility that serves about 11,900 connections across Butler, Bloomingdale, Kinnelon, Riverdale and West Milford, sought the increase to manage rising costs and a $1.65 million budget deficit, according to state records.
Butler Electric officials said the utility had gone more than a decade without a base rate hike, and without additional revenue, Butler Borough taxpayers would have to bear the financial burden of maintaining the system.
The increase caught the attention of officials with the state's Division of Rate Counsel, who argued that the approval process bypassed regulatory oversight. Under state law, municipal utilities that serve customers beyond their borders are regulated as public utilities for those customers and require BPU approval for rate changes.
About 65% of Butler Electric's customers — more than 7,700 — live outside Butler’s municipal boundaries, BPU records show. Rate Counsel representatives ultimately argued that the process to obtain the rate hike through the Local Finance Board was flawed and removed due process protections and participation rights for ratepayers outside of Butler.
The dispute was further complicated when Butler Electric officials filed an application with the BPU on Dec. 5, 2024, seeking to nearly triple its Levelized Energy Adjustment Clause (LEAC) rate from $0.027756 per kilowatt-hour to $0.077221 per kilowatt-hour. The LEAC rate covers fluctuating energy supply costs and is typically reviewed by the BPU. Officials with the Division of Rate Counsel said the additional increase compounded the financial impact on ratepayers and should be examined as part of a full rate proposal and review, records show.
After reviewing the case, BPU staff recommended that the board assert jurisdiction, require Butler Electric to file a formal petition for the rate change and mandate that any future rate changes be submitted to both the BPU and Division of Rate Counsel before implementation.
BPU officials agreed on March 19, ordering that Butler Electric’s rates, including the LEAC rate, must be subject to BPU oversight.
Butler Electric's base rates as of March 2025 start at $5.01 for residential ratepayers, according to its website. Rates for residences using between 16 and 600 kilowatt-hours is $0.050298 per kilowatt-hour. For usage over 600 kilowatt-hours, the rate is $0.040107 per kilowatt-hour. All rates represent increases of roughly 26% from March 2024's rates, records show.
The rate review at the BPU is expected to come on or before Jan. 1, 2027. The Local Finance Board barred Butler Electric from seeking another hike before that date, state records show.