PSEG Long Island is pushing back at the state Department of Public Service and its attempts to lower the utility's projected revenue from a rate hike over the next three years, saying its contract with LIPA trumps the agency's authority.

In papers filed Thursday, PSEG makes repeated references to the language in the LIPA Reform Act and its contract with LIPA to rebut the DPS' efforts to trim budgets and sales forecasts. PSEG seeks $387.1 million in new revenue through rate hikes from 2016 to 2018, but a recent draft review by a DPS advisory committee recommended it be lowered to $324.6 million. A final DPS ruling is expected by month's end.

PSEG said $43.7 million in recommended cuts will "significantly impair" its ability to meet contract obligations, "particularly with respect to reliability and customer services." PSEG also questioned the state's right to question those expenses under the law.

"Although the DPS is certainly correct that it has been given the task to present recommendations to the LIPA Board regarding the rates to be charged in this matter, that responsibility does not give the DPS license to transgress upon the carefully negotiated rights and obligations of the . . . [LIPA contract] or to recommend changes to it through this Rate Plan review," lawyers for PSEG wrote.

PSEG broached the prospect that DPS' recommendations could violate terms of its contract, and let PSEG walk away from it. The LIPA contract, PSEG noted, "permits PSEG LI to terminate the contract if a 'change in regulatory law' occurs such that a DPS recommendation alters the scope, nature or level of the DPS statutory oversight and review authority over" PSEG in a way that "adversely affects" PSEG's ability to perform its obligations.

PSEG took particular exception to the advisory committee's draft recommendation that sided with a previous DPS finding that PSEG had overbudgeted for tree-trimming and had overestimated future electric sales. DPS-Long Island has said PSEG and LIPA should only receive $290 million for the three-year rate hike.

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The department is "not permitted to second guess the . . . [contract] and propose additional productivity-based cost disallowances that appear nowhere in that agreement and that fundamentally alter the terms of that contract," PSEG wrote.

In its filing, DPS said, "Followed to its logical conclusion, PSEG's position would have the . . . [LIPA contract] superseding the statutory obligation of the LIPA board of trustees."

PSEG wasn't the only entity that took issue with DPS recommendations in responses to the advisory committee draft. Brookhaven Town in its filing continued to push for the state comptroller to be "invited" into the process to conduct a separate review of the rate case, arguing that a $220 million error by DPS in its initial analysis revealed faults in the process.