After signaling last month that it may need to raise rates this month to recoup $72 million in unbudgeted fuel costs, the Long Island Power Authority now says it will cut residential bills an average of $13 this month.
The reduction would essentially return bills to where they were in February. The unexpected reduction is just the latest in a series of wide fluctuations in the power supply portion of LIPA bills since the utility moved to month-to-month fuel adjustments beginning in October.
In November, for instance, the power supply charge started at 7.0895 cents per kilowatt hour. By last month, it jumped to 10.7842 cents -- a 52 percent leap. The latest reduction for April represents a 16 percent cut from last month, to 9.0335 cents per kilowatt hour. Most months between November and March saw increases -- a 21 percent jump between November and December, and another 23 percent jump between December and January.
The reduction in April means the power supply charge has jumped 27.4 percent since November. The power supply charge represents about half of customer bills.
The fluctuations are significant, particularly for business customers. LIPA said the April cut amounts to around $13 for the average residential customer with a $150 monthly bill. For a business whose bill includes a $1,000 power supply charge, the change from November represents an increase of around $250.
LIPA spokesman Mark Gross in an email described April reduction as "good news" for ratepayers. "The April rate is based upon the latest market conditions and also recovers what we believe is the rest of the $76 million that wasn't recouped in March bills," Gross said.
But LIPA trustee Matthew Cordaro said the dramatic swings in the power supply charge were a concern."It would be more desirable to see the changes not so extreme. Maybe this requires better projection of fuel costs for the upcoming months," Cordaro said.
Calculating the monthly charge is a joint effort by LIPA and its contractor, National Grid. LIPA spokeswoman Elizabeth Flagler said National Grid, which operates the grid under contract to LIPA, "projects the cost of fuel and LIPA turns it into a rate."
The reason for the wide fluctuation in January and March, she said, was that "it turned out fuel was even higher than expected and needed to be recovered in the March power supply charge."
LIPA's switch to monthly adjustments in October was a change from its previous annual and then quarterly adjustments. The change, welcomed by Wall Street because it meant LIPA recouped fuel costs immediately, came with the caveat that customers could see more volatility in bills, especially in cold winter months when natural gas costs tend to increase. Most LIPA-contracted plants are fueled by natural gas.
Separately last month, LIPA said the U.S. Environmental Protection Agency awarded it a 2013 Energy Star Partner-of-the-Year Sustained Excellence Award for its work in energy efficiency. The award is given to entities that reduce greenhouse gas emissions by setting and attaining aggressive goals on energy efficiency. LIPA's Efficiency Long Island program provides rebates and other energy-reducing incentives.