LIPA: Repair bill for Sandy will hit $950M
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The bill to repair the local electric system after superstorm Sandy is expected to hit $950 million, but the Long Island Power Authority said Thursday that it won't raise rates to cover those costs -- at least for now.
Next year's $3.6 billion budget, announced at a meeting of LIPA trustees' finance and audit committee at the agency's Uniondale headquarters Thursday, pushes until well into 2013 the question of how much LIPA will receive in federal reimbursements for storm damage and repair. Trustees were told that LIPA expects up to 100 percent of the $950 million could be covered.
LIPA also announced that more than 988,000 customers who experienced outages during the storm will receive credits for the daily 36-cent service charge on their bills for the days they had no power. Many had complained that the charge was unfair because they received no power those days. In all, the service-charge credits will cost LIPA $4.9 million, and combined with suspended late fees, collections and other customer credits, will result in $11.1 million in customer givebacks related to the storm.
LIPA acknowledged that if the Federal Emergency Management Agency reimburses only 75 percent of its costs, the $250 million in LIPA exposure could result in a rate increase later next year. LIPA has already started reviewing and paying the Sandy bills, which thus far total $930 million, but could increase another $20 million as it completes work in hard-hit flood zones, said Michael Hervey, LIPA's outgoing chief operating officer. He said if LIPA is hit with a bill, its cost would be spread over 10 years, but added, "Clearly, we'd rather not have it at all."
Michael Taunton, LIPA's chief financial officer, said LIPA has enough cash on hand, and other resources, including a planned credit line of $500 million this month, to cover expenses from the storm. LIPA is still expecting $100 million in reimbursements from FEMA from last year's Tropical Storm Irene. LIPA also expects to issue between $200 million and $250 million in new debt next year, even as rating agencies have issued negative outlook notices for LIPA. Thuesday, Standard & Poors joined Fitch and Moody's in issuing a negative outlook, saying, "protracted power outages following superstorm Sandy contribute to a political climate that diminishes the utility's rate-making and financial flexibility."
Nevertheless, several LIPA trustees who attended the hearing and will vote on the budget next week without the normal public hearings generally applauded the budget. Trustee John Fabio said, "We know what the challenges are and hopefully, if the governor is successful and gets 100 percent [FEMA] reimbursement, that would be marvelous."
Gov. Andrew M. Cuomo, who this week traveled to Washington to shore up support for billions in Sandy recovery funding, urged LIPA to hold rates stable despite the storm bill, an administration official told Newsday last week.
LIPA's budget includes a $14 million infusion from New York State to help fund renewable energy programs, a grant that will allow it to maintain the programs at $120 million -- a slight increase over last year. Trustee Neal Lewis, who has pushed hard to keep funding intact for renewable and efficiency programs, said, "We're very happy with that."
LIPA in 2012 expects revenue from the sale of electricity to come in $134 million below previous projections, mainly the result of lower customer usage, because of a sluggish economy and the effectiveness of energy efficiency programs.