Courts: BPU must arrange for retroactive payments in utilities line-extension case

TRENTON – A state appeals court has ordered the Board of Public Utilities to arrange for refunds to builders and possibly hundreds of parties affected by a set of invalidated rules.

The court ruled in a case involving so-called Main Extension rules, in which BPU ordered utility companies at one time to pay for extension of lines to new homes in designated “smart growth” areas of the state.

However, in other areas of the state that were not designated as “smart growth” areas, the developer or the homeowner had to bear the cost.

The courts held BPU lacked such authority in absence of legislative approval to make such a rule.

But in October 2010 BPU decided it would limit the retroactive aspect of the case to 18 developers who had not yet completed pipeline extensions.

Numerous parties, including the N.J. Builders Association, Toll Bros., and Dunhams Farm Developers, argued that BPU’s decision to limit retroactivity is incorrect.

In overturning BPU’s decision, the courts held that because utilities maintain meticulous records it is possible to make refunds to the hundreds of affected parties.

The court today ordered BPU to develop a regulation establishing the procedure for granting refunds.

The matter goes back to 2005 when BPU adopted and incorporated environmental and planning principles into the reimbursement scheme.

Utilities were prohibited from paying “for the first time in nearly a century” for extensions in non-smart growth areas, unless they could establish they qualified for certain exemptions.

In 2006, the court overturned those rules in a case involving developer Centex, which was building an age-restricted complex in Howell.

Because the location was not a “smart growth’’ area, BPU said utilities could not in any way financially support utility service extension to the Centex project.

After the courts ruled in the Centex case, BPU tried to limit the retroactivity, and today the court ruled on that aspect.

Courts: BPU must arrange for retroactive payments in utilities line-extension case