PSEG Long Island next month will add a new charge of $1.69 to average customer monthly bills to recoup a 2015 revenue shortfall under a newly instituted LIPA policy ostensibly aimed at promoting green-energy programs.
Called a “revenue decoupling adjustment,” the charge is an outgrowth of a change LIPA instituted last year to help the utility recoup costs even if sales dip below expectations.
For the second half of 2015, the shortfall amounted to $18.3 million, according to figures LIPA released last month. Average residential customers will see the $1.69 charge on their bills, but commercial and other customers could see a larger figure. LIPA has blamed the sales shortfall on an unusually warm December.
Decoupling mechanisms were designed to provide incentives for investor-owned utilities to promote green-energy programs even though they may lead to lower sales. LIPA’s decoupling mechanism, approved by its trustees in 2015, allows the utility to recoup revenues for practically any factor affecting sales, including cooler-than-expected summer weather.
Jeffrey Weir, a PSEG spokesman, said the company was “continuing to work closely with LIPA to calculate and implement any adjustment that may be necessary.” The statement left open the prospect that PSEG was still negotiating a final amount or whether it would be charged at all, even as bills are set to go out in just weeks. A PSEG bill statement said the charge would take effect March 1.
The LIPA decoupling adjustment would cover a revenue shortfall that occurred between April and December. Four classes of customers, including the largest residential category, pay a portion of the adjustment based on their contribution to the shortfall.
LIPA first detailed the prospect of a 2016 decoupling charge at a meeting of its finance and audit committee of its board last month, listing the charge at $18.3 million. The figure has been called preliminary and is being reviewed by the state Department of Public Service.
In a bill announcement this month, PSEG, which runs the electric grid for LIPA, noted that the adjustment can be both a credit or a charge, depending on whether or not utility sales meet or exceed the budgeted revenue forecast.
The decoupling charge comes in addition to an increase in the delivery charge LIPA and PSEG implemented in January after a rate filing with the state Department of Public Service. The move increased the delivery charge portion of bills just under 1 percent starting in January. The charge will increase more than 3 percent in each of the next two years.
At the same time, the power supply charge is generally down from 2015 levels. It fell to a record low of 5.27 cents a kilowatt hour in January, but crept up to 6.29 in February. In February 2015 it was 10.27 cents a kilowatt hour. Colder weather could push the charge up marginally in March, but overall bills this year are lower than last year because of the lower fuel charge.