LIPA considers new billing method

LIPA's chief operating officer Michael Hervey after a LIPA's chief operating officer Michael Hervey after a meeting. (Aug. 15, 2012) Photo Credit: Newsday/J. Conrad Williams Jr.

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The Long Island Power Authority is weighing a new billing method that would allow the agency to recover fuel costs each month based on actual bills rather than quarterly estimates.

Under the plan, customer bills would be adjusted on a monthly basis to reflect price fluctuations in the natural gas used to fuel most regional power plants.

LIPA currently adds a power-supply surcharge to each monthly bill to reflect its costs in purchasing fuel. Adjustments are made every three months.

The planned change will be the subject of public hearings Monday. The month-to-month method could be voted on by LIPA trustees Tuesday and implemented next month. The change would not affect the delivery-charge portion of bills.

The new billing scheme would move LIPA closer to the practice of nearly all other state utilities, officials have said.

Bond-rating agencies also favor the quick-recovery model, which means that if, for instance, natural gas prices spiked in a given quarter, LIPA would not have to pay out millions in fuel costs before it could charge back those costs to consumers.

Before moving to the quarterly adjustments in the past year, LIPA in previous years had projected fuel costs for an entire year with only occasional adjustments.

In some years, it resulted in the overcollection of more than $100 million, which LIPA was required to give back to customers the following year.

LIPA will still begin each year with a projected rate, then adjust accordingly as actual fuel bills arrive. If the cost of fuel increases, say, $10 million in January, LIPA would increase each customers' February bills to recover that cost.

LIPA chief operating officer Michael Hervey said the new billing method would "increase transparency" by passing through real-time costs in fuel prices, avoiding over- or under-collecting.

He said customers would benefit by "now having the ability to see how their electric prices vary at the same time as other energy products such as gasoline, fuel oil and natural gas."

One observer took issue with the projected element of the billing model.

"The oil guy doesn't charge you on a projected basis," said Matthew Cordaro, chairman of the Suffolk County Legislature's LIPA Oversight Committee. "Why promulgate something that invites guesswork? It's a way of building in slush."

Con Edison computes fuel costs each day, and customers are charged for fuel based on that cost at month's end. LIPA argues that the method it proposes allows customers to "find out their power supply charge before they consume the energy," and adjust future use accordingly.

Cordaro generally praised LIPA for moving away from the old scheme of overcollecting millions on customers' backs. "They're doing the right thing -- they should do it the right way."

The hearings start at 10 a.m. at the H. Lee Dennison Building, 100 Veterans Memorial Hwy., Hauppauge.

A second hearing is scheduled for 2 p.m. at LIPA's headquarters at the Omni Building, 333 Earle Ovington Blvd., 4th floor, Uniondale.

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