LIPA's $3.526B 2014 budget holds rates, cuts staffing, green programs

LIPA and other utility crews work to repair

LIPA and other utility crews work to repair damaged poles and downed lines in Elmont. (Aug. 27, 2013) Photo Credit: Newsday / J. Conrad Williams Jr.

advertisement | advertise on newsday

The Long Island Power Authority's $3.526 billion budget for 2014 holds the line on rates but cuts tens of millions of dollars in staffing, green-energy programs and consultant costs.

The proposed budget, unveiled Tuesday, represents a $71.9 million reduction from this year's budget as customer energy use declines. It will be LIPA's first budget with PSEG-Long Island running the local electric grid.

PSEG officials said at a presentation at LIPA's headquarters in Uniondale they will operate the grid with about 2,259 employees, including 1,925 who are currently National Grid or LIPA "incumbents," mostly unionized workers.

Officials wouldn't say whether that workforce is an increase or decrease from the current number of employees operating the system at National Grid, noting that some have dual roles in National Grid's gas and electric operations. LIPA's 100 employees will be cut to 50, but many ultimately may go to work for PSEG-Long Island, officials said.

PSEG's tab for operating the LIPA grid next year will be $446 million, a jump from National Grid's $291.1 million this year, reflecting the larger role PSEG is taking on, subject to IRS approval.

The 2014 rate freeze applies to the delivery charge, which is expected to remain at $87.62 for the average residential bill. The other half of the bill, called the power supply charge, will continue to fluctuate monthly -- it increased to 7.7 cents per kilowatt hour this month after dropping to 7 cents in October.

PSEG proposed spending $94 million on renewable energy and efficiency programs next year, a $26 million cut from 2013. Officials said they expect to reach the same power-saving goals next year with the lower budget, cutting 60 megawatts of customer demand each year. The budget for solar-energy rebates drops to $11.1 million next year from around $30 million this year.

The proposed 2014 budget, which must be approved by LIPA trustees at a Nov. 26 meeting, cuts LIPA staff and benefits costs by $6.5 million to $14.8 million as LIPA trims employees. LIPA will cut another 10 employees by 2015. The budget also reduces LIPA's professional services budget for consultants by $7.2 million to $18.6 million.

Even as PSEG-Long Island takes over, National Grid will remain a presence behind the scenes. LIPA will continue to use a National Grid computer system, known as enterprise resource planning, for at least two years, at a cost of $12.9 million a year. PSEG will begin to implement a new system next year, at a total cost of some $100 million by the time it's ready in 2016.

LIPA bills next year will include the PSEG-Long Island logo and feature a new "securitization" charge, reflecting the costs to refinance about $1.5 billion in old LIPA debt. The agency expects to save $15 million from the refinancing next year, an amount that will help LIPA freeze rates. The savings are expected to increase in 2015, said LIPA chief financial officer Michael Taunton.

LIPA trustee Matthew Cordaro said the budget was based on what appeared to be best-case scenarios. For instance, PSEG has budgeted $47.8 million for storm restoration next year, a number that can quickly increase if a big storm hits. This year, LIPA spent $20 million more in storm restoration costs than projected, for a total of $71.3 million.

"The budget is based on optimistic projections," Cordaro said. "It's great if the optimism holds out. If it doesn't, we're in the same boat."

2014 LIPA budget

The $3.526 billion spending plan includes:

A $26 million cut in green energy spending, to $94 million

A $6.5 million cut in LIPA staff and benefits costs, to

$14.8 million

A $7.2 million reduction in consultant costs, to

$18.6 million

$12.9 million to continue usage of a National Grid computer system after PSEG-Long Island takes near-total control of the LIPA system in January.

About $15.7 million in savings from refinancing $1.5 billion in old LIPA debt.

The best of Newsday every day in your inbox. Get the Newsday Now newsletter!

Comments now uses Facebook for our comment boards. Please read our guidelines and connect your Facebook account to comment.

You also may be interested in: