Electricity from the Long Island Power Authority remains among the most expensive for large U.S. public power utilities as well as tristate and Northeastern ones, despite declining natural gas prices that have steadily lowered Long Island electric bills over the past two years.
Like nearly every other U.S. utility, LIPA and its contractor PSEG Long Island have benefited from a steady reduction in the cost of natural gas to run power plants, resulting in a nearly 50 percent reduction in the power supply charge to customers over the past two years. While the charge has crept up this year, the overall reduction has largely offset a delivery charge increase of just under 1 percent in January and an average $1.69 charge to make up for weather and renewables-related prior-year revenue shortfalls.
But in comparisons with peer utilities, LIPA’s total rate — which includes residential, commercial and transportation — ranks among the top third most expensive, according to a Newsday analysis of figures from the U.S. Energy Information Administration, known as EIA.
LIPA’s comparatively higher rates come even with its advantages of tax-exempt debt, federal reimbursement of storm costs and lack of a profit motive because it’s a public power utility.
Using the EIA numbers and comparing them with a ranking of 2015 J.D. Power and Associates electric utility survey companies, LIPA in 2015 had the fourth-most expensive power among the 17 large Northeastern utilities, and the lowest customer-satisfaction score. PSEG, which manages the electric grid for LIPA, has been working to increase the customer-satisfaction score, and in the most recent period raised it to 623 from under 600 last year out of 1,000 points.
In the Northeast, LIPA’s 2015 cost per kilowatt hour of 18.1 cents was lower only than Con Edison’s (23.5 cents), Massachusetts-based NSTAR’s (19.8 cents) and Connecticut Light & Power’s (19.2 cents).
LIPA’s rate was higher than those of PSEG sister company PSE&G of New Jersey (14.9 cents), National Grid’s Niagara Mohawk (12.6 cents), Baltimore Gas and Electric (13.9 cents), Central Maine Power (7.8 cents), Duquesne Light (14.3 cents) in Pennsylvania and PPL Electric Utilities (14.3 cents) also in Pennsylvania, among others.
“PSEG has done a lot of things to improve satisfaction, but price is one of the things where they are still challenged to improve from the customer perspective,” said John Hazen, director of the energy practice at J.D. Power. “Price is one of the things that does kind of drag them down.”
When compared with large public power utilities across the country, LIPA’s rate is generally higher, according to the EIA figures.
LIPA’s 18.1 cents compares with 15 cents for Los Angeles Department of Water & Power, 12.7 cents for Sacramento Municipal Utility District, and 9.9 cents for the Salt River Project in central Arizona. JEA of northcentral Florida was priced at 10.3 cents.
In the tristate area, LIPA’s rate is higher than not only that of PSE&G, but also Rockland Electric (16.4 cents), Jersey Central Power & Light (13.1 cents), and Atlantic City Electric (16.6 cents).
LIPA chief executive Tom Falcone noted that New Jersey utilities don’t face the taxes that LIPA and other New York utilities do. “If you could pick up Long Island and move it to Newark, our bills would decline,” he said.
Experts say there are mitigating circumstances that make comparison to LIPA relevant or not — such as LIPA’s generally higher taxes, a swelling debt load of around $9,000 per customer, and costly capacity contracts to which LIPA is tied.
LIPA may not have the most expensive rates in the continental U.S. as it once did, “but it is one of the most expensive utilities in the country,” said LIPA trustee Matthew Cordaro, who has operated utilities in Tennessee and New York. “It’s not a bargain-basement utility.”
In recent months, LIPA in public forums has offered a selective comparison of its rates against higher-priced competitors to counter the perception that the rates are among the nation’s highest. Its bills, LIPA notes, have come down in the past two years as natural gas has fallen, while local rivals, once less expensive, have seen their kilowatt-hour costs surpass LIPA’s since 1997, when investor-owned LILCO ran the utility.
“When I’m out and about nobody believes this, nobody knows about this,” Falcone said at a LIPA trustee meeting last month.
LIPA bases that statement on a graphic comparison with four other regional utilities: Con Edison, Connecticut Light & Power, Orange & Rockland Utilities, and United Illuminating, also of Connecticut. And, according to figures, LIPA’s total rate in 2015 was lower than those three utilities, by half a penny to a nickel per kilowatt-hour.
LIPA’s 2015 cost of 18.1 cents a kilowatt-hour is down from 20.52 cents in 2014, according to the data. ConEd’s rate for 2015 was 23.5 cents, United Illuminating’s was 22.7 cents and Connecticut Light & Power’s was 19.2 cents.
Falcone said comparison with those utilities was most appropriate because they have “the most similar costs to us,” for fuel, taxes and other expenses.
But each of those utilities is owned by shareholders and, unlike LIPA, is driven by the profit motive. None is reimbursed for storm costs or receives federal grants to harden their system: LIPA has received a combined $1.4 billion from the federal government to harden its system against future damage and to repair damage following superstorm Sandy.
Another measure of LIPA/PSEG’s bills can be gleaned from the website of a local rival. Freeport Electric, a municipal utility, did its own analysis of some utilities in New York state and lists PSEG/LIPA as the state’s third-most costly utility for residential electricity.
In that analysis, PSEG/LIPA’s average January 2016 residential bill was 13.77 percent higher than that of Central Hudson customers, 20.7 percent higher than Rochester Gas & Electric, 29.9 percent higher than Freeport Electric, 30.43 percent higher than Niagara Mohawk/National Grid, 35.42 percent higher than Rockville Centre, and 39.7 percent higher than New York State Electric & Gas.
Greenport Electric isn’t listed but its rates, which like Rockville Centre’s and Freeport’s are subsidized by cheap hydropower from New York Power Authority, are on par with those two Long Island municipal utilities.
Freeport Electric on its website lists the source of its information as PSEG.
In the analysis, average LIPA/PSEG residential customers in January paid a $124.95 electric bill, while Con Ed customers using the same 750 kilowatt-hours paid $176.97 and Orange & Rockland (a Con Ed subsidiary) paid $143.04.
But while Con Ed’s total rate may be higher than LIPA’s, the actual bills most Con Ed customers receive tend to be lower because Con Ed’s primarily urban customers use around half the electricity that LIPA customers do, according to federal figures.