(Adds detail on the impact to ratepayers, paragraphs 5-8)
LOS ANGELES, July 29 (Reuters) - Public Service Enterprise Group Inc (PEG.N) unit PSE&G can spend $515 million of ratepayer money for 80 megawatts of solar power projects, New Jersey utility regulators ruled on Wednesday.
Regulators reduced PSE&G's original proposal of $773 million for 120 megawatts of solar power. The state utility regulating board killed plans for solar panels on government buildings.
Some 40 megawatts of power will be generated by placing small solar units on 200,000 power poles in the PSE&G service territory. PSE&G says this will be the largest pole-attached solar project in the world.
The other 40 MW will come from solar panels on commercial roofs and in "solar gardens" owned by PSE&G as well as third parties.
The projects are to be installed by the end of 2013. By the time they are up and generating, the average PSE&G residential customer will be paying about 10 cents per month for them. Rates will be increased until 2028 to pay for the solar projects, and the average customer will eventually pay 35 cents per month for them.
A PSE&G spokeswoman said the cost to utility customers will be defrayed by federal credits for solar projects, which the utility will sell on the open market, as well as with federal tax credits and by selling power the panels produce into the PJM power grid market.
No estimate was given as to the amount of the defrayed costs.
While New Jersey customers are not paying the full $515 million, that overall cost for development of 80 megawatts of electricity generation is about $6.4 million per megawatt. It costs about $500,000/MW for natural gas power plants, $2 million/MW for coal plants and $4 million/MW for nuclear power plants.
When all units are up and generating, 80 MW can power about 640,000 New Jersey households.
PSE&G is allowed a 10 percent rate of return on the projects.
PSE&G is the regulated gas and electric utility in New Jersey for its parent, which is based in Newark, New Jersey.
"Our program will effectively double the size of New Jersey's installed solar capacity," said Ralph LaRossa, president and chief operating officer of PSE&G.
"That is more solar capacity than currently exists in any state other than California," he said.
PSE&G also said it has awarded the contract for the pole-positioned solar units to Petra Solar of South Plainfield, New Jersey.
Petra Solar chief executive Shihab Kuran said his company's solar units will use "smart" technology and be connected to the power grid.
PSEG owns and operates more than 16,500 MW of generating capacity, markets energy commodities, and transmits and, in New Jersey, distributes electricity to 2.1 million customers and natural gas to 1.7 million customers. It also has another 2.9 million customers around the world. (Reporting by Bernie Woodall; editing by Jim Marshall)