The plan could pay households and technology companies for reducing peak demand. Its headline savings estimate excludes program and equipment costs, while rules for renters, customer payments and bill effects remain unfinished.
TRENTON, NJ – New Jersey’s proposed virtual power plant would turn thousands of privately owned thermostats, electric vehicles, water heaters and batteries into one coordinated source of grid relief. During a few high-demand hours, a utility or technology company would send commands to enrolled devices, measure the resulting change through smart-meter data and pay for verified performance.
The proposal could reduce the amount of expensive power New Jersey must secure for peak periods. It also creates a new chain of payments among electric customers, utilities, device owners and technology aggregators.
A review of the New Jersey Board of Public Utilities’ 94-page draft, the agency’s supporting documents and comments from the New Jersey Division of Rate Counsel finds that the technical outline is detailed, but the central financial and access rules are still open.
The BPU has not set customer payment rates, calculated a net savings figure, estimated the effect on monthly bills or established how landlords and tenants would divide compensation. The proposal is a draft for public comment, not an approved program.
As Morristown Minute previously reported, the BPU is considering an interim utility-administered program for 2027 through 2029, followed by a longer-term market in which licensed technology companies could combine customers’ devices and sell their flexibility to utilities and the regional grid.
How one virtual power plant event would work
A virtual power plant is software and communications infrastructure, not a new generating station. Its useful output is the combined change from many small devices.
The proposed process has five steps:
- A customer enrolls an eligible device. The customer would agree to the program contract, the sharing of smart-meter data and remote control during called events. Each utility would have to offer a utility-administered option and a third-party aggregator option. An aggregator could be a device manufacturer or an independent company managing several brands and device types.
- The utility records what each device can do. A management platform would track the device’s location, available capacity and connection status. The home’s advanced meter would supply energy-use data, generally in 15-minute intervals. The meter measures performance, but it does not necessarily control the device. A separate connection, which could use cellular service, two-way radio or another supported channel, would carry the command.
- The utility calls an event. An event could respond to a forecast statewide peak, a local overloaded circuit or a request from PJM Interconnection, the regional grid operator. The draft proposes events of no more than four hours, with up to 20 summer events, 10 winter events and 35 total events in a year. Standard notice would be at least two hours; an emergency event could arrive with 10 minutes’ notice.
- Enrolled devices change their operation. A thermostat could pre-cool a home and then raise the temperature setting during the event. An EV charger could delay or slow charging. A water heater could heat earlier and pause during the peak. A battery could hold a minimum charge in reserve, then discharge into the home or grid. The exact temperature change, charging limit and battery reserve would depend on the final program and customer contract.
- The utility measures and settles the result. The draft would compare the customer’s event-period use with a baseline based on recent non-event days. Utilities would propose the number of comparison days, weather adjustments and treatment of seasonal use. Payments would be tied to the verified reduction, with possible differences by season, time and grid location.
That baseline is an estimate of what the customer would have used without the event. It cannot be observed directly. Reference days and weather adjustments can therefore change the calculated reduction, the participant’s payment and the program’s reported savings. The BPU has left the exact formula for later utility filings.
Customers would be allowed to opt out of an individual event, although frequent opt-outs could reduce their incentive. The proposal would also let a utility override an aggregator’s command for defined grid-safety reasons.
This means enrollment would not give a utility unlimited control of a home. It would give the utility or aggregator permission to make limited changes under a contract, during defined events, with an opt-out. The final contract terms will determine how much control a participant actually gives up.
A thermostat could qualify without a battery or EV
The program would accept smart thermostats, managed EV chargers, electric water heaters, batteries, solar paired with controllable equipment and commercial loads. A household would not have to provide the draft’s 10-kilowatt interim minimum by itself. That threshold applies to the combined group of devices dispatched in an event.
A compatible thermostat connected to a central air-conditioning system or heat pump could therefore be sufficient. It would still need a communication method supported by the utility or aggregator.
New Jersey has not proposed a thermostat payment. A current Massachusetts program shows what a low-cost entry point can look like: Mass Save’s ConnectedSolutions program offers a $50 or $100 enrollment payment based on income and $20 annually for each qualifying thermostat. That is an example for comparison, not a New Jersey benefit.
The $60 million estimate is gross, not net
The BPU’s principal estimate starts with a proposed 3% peak reduction, equal to about 589 megawatts statewide. It multiplies that reduction by a recent PJM capacity price, a reserve factor and a performance assumption.
At 91% performance, the draft calculates $61.3 million in gross annual avoided capacity costs. An appendix also presents a lower case using 64% performance, based on average participation during five 2025 demand-response events. That calculation produces $42.6 million at the same 3% target.
Both figures assume the peak reduction changes the amount of capacity allocated to New Jersey customers in the PJM process. The draft acknowledges that actual value could change if capacity prices fall, PJM does not recognize the reduction in the expected manner, customers perform differently or the system peak moves to another hour.
The draft also identifies possible savings from lower wholesale energy purchases, reduced participant use and deferred transmission or distribution projects. It does not quantify those categories. It says the way wholesale energy savings reach customers would depend on New Jersey’s Basic Generation Service procurement process.
Neither estimate subtracts:
- Customer incentive payments.
- Payments retained by aggregators.
- Utility administration and technology integration.
- Measurement and independent evaluation.
- Marketing.
- Cybersecurity and regulatory compliance.
- Thermostats, chargers, batteries or other household equipment.
The BPU separately proposes about $68 million in interim utility budgets from 2027 through Sept. 30, 2029: roughly $30 million for PSE&G, $16 million for JCP&L, $20 million for Atlantic City Electric and $2 million for Rockland Electric. Those budgets would include administration, contractors, integration, customer incentives, evaluation and marketing. Hardware incentives would be handled through other BPU programs.
The $61.3 million figure is annual, while the $68 million budget covers a multiyear start-up and operating period, so subtracting one directly from the other would be misleading. The draft does not provide aligned annual costs and benefits or a net savings estimate.
The BPU says each utility filing would have to show benefits greater than costs and report actual performance. The first comprehensive evaluation would occur about a year after launch.
Who would receive the money
The answer depends on which money is being followed.
All ratepayers: If the virtual power plant lowers New Jersey’s contribution to PJM peak demand, electricity suppliers would need to buy less capacity. The proposal says that avoided cost would flow to ratepayers through the supply and rate process. It would not arrive as a separate PJM payment to each household, and the draft does not estimate the change on a typical monthly bill.
Participating device owners or customers: The longer-term proposal has three possible payment paths. An enrollment payment could compensate the owner of a connected device. A capacity-reservation payment could compensate the participant for keeping a battery charged, an EV charger available or a building ready to adjust. A performance payment would pay for the reduction actually delivered during an event. The BPU has not set dollar amounts for any path.
Technology aggregators: In the longer-term structure, money would generally move from a utility or PJM to an aggregator and then to the enrolled customer. The draft proposes that aggregators pass through at least 70% of pay-for-performance payments to customers and disclose their method. The document says aggregators commonly retain 10% to 30% of program payments. The proposed 70% floor applies to performance payments; the draft does not establish the same minimum for enrollment or capacity-reservation money.
Utilities: The utilities would recover approved program costs through existing rate mechanisms, with the exact treatment left for a later BPU order. Cost recovery reimburses authorized expenses; it is not automatically utility profit. The draft recommends treating much of the administration and incentive spending as an expense instead of placing it in rate base.
One exception remains under discussion. The BPU could allow limited utility ownership of batteries on specific constrained circuits after a separate review. A utility can generally earn a regulated return on an approved capital asset in rate base. Rate Counsel opposes utility-owned storage unless a competitive process proves it is the least-cost option.
PJM: PJM would administer wholesale dispatches and settlements. The draft does not propose that PJM retain New Jersey’s avoided capacity costs. Wholesale revenue could go to an aggregator, while reduced capacity obligations would reach customers through electricity-supply charges.
Who would bear the costs
Participating households may supply equipment they already purchased, including a thermostat, EV charger or battery. The BPU draft treats hardware incentives as separate from the $68 million interim budget and suggests that some future equipment subsidies could require VPP enrollment for at least seven years.
That separation matters to the accounting. The draft says participation has no customer cost for purposes of one proposed benefit test. It also relies first on customer-owned equipment and does not assign a value to battery wear, delayed EV charging or temporary temperature changes. A household may decide those effects are minor, but they are part of the exchange.
Utilities would seek recovery of approved program spending from customers under mechanisms the BPU has yet to specify. Customers who never enroll could therefore pay part of the administration and incentive costs. Their return would be the share of any verified system savings that appears in rates.
Cybersecurity and compliance costs are also unpriced. The BPU proposes encryption, mutual authentication, restricted access, incident response and recognized technical standards. It is considering SOC 2 Type II reports as one way for aggregators to demonstrate compliance, while acknowledging that the audit cost could block smaller companies. The draft asks for alternatives but gives no statewide cost estimate.
Rate Counsel says the BPU should compare all of these costs with the value of conventional capacity and grid upgrades, use performance payments and penalties, prevent duplicate compensation from overlapping programs, and ensure that most verified savings stay with ratepayers. Those are recommendations from the state’s ratepayer advocate, not final program rules.
What the proposal means for renters
The draft repeatedly identifies renters, multifamily buildings and lower-income households as priorities. It does not provide the operating rules needed to guarantee their access.
Can a landlord enroll a device serving a tenant apartment? The draft does not say. It requires affirmative customer consent for meter-data sharing and real-time control, but it does not define who may consent when the landlord owns the thermostat or battery, the tenant holds the utility account and the tenant experiences the temperature or charging change. A landlord should not be assumed to have unilateral authority under the current text.
Who would receive the payment? The proposed enrollment path sends money to the device owner, which could be a landlord. Performance money would pass through the customer-aggregator contract. The draft does not establish a landlord-tenant split. Rate Counsel has suggested an upfront payment to a landlord who installs equipment and ongoing event payments to the renter affected by control events. The BPU has not adopted that proposal.
Can multifamily buildings participate? In technical terms, yes. A building owner or aggregator could combine controllable heating, cooling, water heating, batteries, chargers or common-area loads. The draft includes multifamily housing among the populations to reach. It does not create a dedicated multifamily enrollment process, determine how savings would reach individual tenants or resolve consent for equipment serving several units.
These missing rules create a split incentive. A tenant may benefit from an annual payment but lack authority to install a device. A landlord may control the equipment but have little reason to accept events that affect a tenant.
What the proposal means for lower-income households
Ownership of an EV, home battery or connected heating system is not required. A qualifying smart thermostat could provide a less expensive route into the program.
The remaining access questions are financial and practical:
Will New Jersey subsidize equipment? Possibly, through separate energy-efficiency, transportation or storage programs. The draft does not set subsidy amounts, promise a free device or reserve funding for lower-income households. It points to programs in other states with no-cost installations as models to study.
Will households without broadband be excluded? The draft does not impose a general home-broadband requirement. It says device commands may travel through two-way radio, cellular service or other supported communications. A device must still remain connected through a channel accepted by the utility or aggregator, so eligibility may vary by device, vendor and service area.
Will participation affect energy assistance? The draft does not address the Universal Service Fund, Low Income Home Energy Assistance Program or other benefits. The Universal Service Fund provides an income-based monthly utility-bill credit, while LIHEAP provides grants to eligible very low-income households. The BPU and Department of Community Affairs would need to clarify whether a VPP payment is treated as income, a bill credit or another form of compensation before an assistance recipient could assess the effect. The current documents do not support a promise that benefits would remain unchanged.
Are there guaranteed equity protections? No final set-aside, enrollment goal, income-tiered payment or free-equipment requirement appears in the draft. Utilities would have to explain how their filings reduce barriers for lower-income customers and overburdened communities, and the BPU says it will assess projected bill effects. Those are planning and reporting requirements, not guaranteed participation or compensation.
Without specific equipment and payment rules, households that already own batteries, EVs and connected devices would have more ways to earn money at launch than renters or households without those assets. A thermostat pathway, multifamily aggregation, targeted equipment support and a defined landlord-tenant payment split could narrow that difference. Each remains subject to later BPU decisions.
What data and control participants would give up
The proposal divides data access into enrollment information, 15-minute meter data and real-time dispatch data. Interval and control access would require customer authorization. Aggregators would be expected to collect only information needed for operation, settlement and compliance.
The BPU proposes end-to-end encryption, certificate-based authentication, continuous monitoring and role-based access. Serious operational cyber incidents would be reported to the BPU, and unauthorized customer-information releases would require notice within 48 hours under the proposed framework. Repeated security failures could lead to suspension or removal of an aggregator.
Those controls reduce risk but do not eliminate it. A final customer agreement should make clear which company can see meter and device data, how long it keeps the information, which commands it may send, how a customer exits and what happens to stored data after enrollment ends.
Decisions still ahead
The BPU expects to set minimum filing requirements in fall 2026, followed by utility program filings by Dec. 31, 2026 and launches in 2027. The proposed 3% peak reduction is a planning reference under review; the final target and whether it is binding will be decided later.
Before approval, the public record still needs specific answers on net ratepayer savings, monthly bill effects, customer payment rates, aggregator margins across all payment types, hardware support, multifamily consent, landlord-tenant compensation, energy-assistance treatment and the cost of cybersecurity compliance.
The BPU is accepting public comments under Docket No. QO26030099 until 5 p.m. Aug. 17, 2026 through its public case docket.