Editorial: LIPA's monthly ups, downs reflect energy markets

Power lines seen at sunrise in Melville on Power lines seen at sunrise in Melville on Jan. 11, 2013. Photo Credit: Newsday / Karen Wiles Stabile

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LIPA bashers have short memories.

The current outrage at the Long Island Power Authority over a monthly fluctuation in the power-supply rates is misplaced. These adjustments routinely occur at every utility in the nation to reflect global and regional fluctuations in the energy markets. Under LIPA's contracts with its generating companies, the cost of fuel -- up or down -- is passed on to the utility, which, in turn, passes it through to consumers.

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The September cost is 10.1 cents per kilowatt-hour; in July it was 8.5 cents, the lowest to date for 2013. The peak came in March at 10.8 cents.

It wasn't always this way. In 2006, this page criticized Richard Kessel, then the LIPA chairman, for adjusting the power-supply charge too infrequently. We said he was quick to raise costs -- like the 23 percent fuel hike after Hurricane Katrina in 2005 -- but then very slow to lower them. So in 2006, LIPA was sitting on a surplus of $120 million in ratepayer money. And when did those millions get returned in the form of lower rates? Just before Election Day 2007. The "fuel adjustment" surcharge had gone up 800 percent between 2001 and 2006, raising suspicions that a lot more than fuel costs was buried in the increase. We called it "voodoo rate-making," and said for the sake of transparency that LIPA should go to monthly adjustments. It finally happened this year.

The other part of the LIPA bill, the power-delivery charge, contains all non-fuel costs. It was that rate that Gov. Andrew M. Cuomo said will be frozen for three years.

Monthly rate adjustments were one way to take the politics out of LIPA decision-making. They just take some getting used to.

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