A federal ruling and a separate recommendation from a state regulator could allow Long Island electric ratepayers to avoid hundreds of millions in costs.
The Federal Energy Regulatory Commission this month took issue with a claim by a group of investor-owned utilities -- known as Transco -- that the Long Island Power Authority must pay a 16.7 percent share of billions of dollars in state power-line project costs.
The FERC ruling rejected an application by companies that make up Transco, including Con Edison and National Grid, which are upgrading high-power lines, largely in upstate regions. LIPA at one point considered becoming a member of Transco, but legislation that would allow it was never passed by the State Legislature and projects that would have benefited Long Island were not included in Transco's plan.
"We reject the cost-allocation method" for the upstate projects, the FERC ruling states.
The projects would have saddled Long Island ratepayers with $425 million in costs over the next 20 years. Before the ruling, PSEG Long Island was expected to add some of the costs into the power supply charge starting this year, amounting to more than $103 million in costs for the next four years, according to PSEG's budget. PSEG operates the system under contract to LIPA.
The FERC ruling said the Transco companies and LIPA could submit a revised cost plan that includes renegotiated cost ratios or that divides costs only by those who agree to pay.
Transco "will determine our options and next steps, and work within the regulatory framework to develop a satisfactory outcome," Transco spokesman John Maserjian said. "We believe our proposed cost allocations were fair, consistent with FERC precedent, and accurately align with the benefits the transmission projects would provide."
LIPA general counsel Jon Mostel said the authority would "continue to aggressively assert the interest of our customers."
Meanwhile, the Department of Public Service, in a letter last week from chief executive Audrey Zibelman, laid out a new framework for a one-time $345 million plan by PSEG Long Island to reduce electric demand in the region.
Where once it involved spending more than $100 million on remote-control thermostats, millions more on giveaways of highly efficient air conditioners, installations of west-facing solar panels and other efficiency measures, DPS has advised a new approach.
According to the letter, PSEG and DPS are now in favor of examining LIPA's existing long-term projects to relieve power shortages on the South Fork, Far Rockaway and Glenwood Landing.
The proposed capital budget for 2016 through 2018 includes $32.5 million in upgrades for Far Rockaway, $23.5 million for Glenwood Landing, and $7.7 million in operations and maintenance expenses for the South Fork.
DPS is advising that PSEG issue requests for proposals for companies to address those shortages through "innovative, market-based" solutions, including reducing the demand in those regions rather than spending more money to meet peak loads.
The recommendation conforms to the state's Reform the Energy Vision, which Zibelman and the Public Service Commission, which she chairs, have been working to set as a new statewide standard for such projects.
Just how those cost savings will translate to ratepayer bills remains unclear. Elimination of capital projects could mean a lower percentage increase in the planned three-year rate case that PSEG and LIPA are proposing. It also could mean that LIPA would not need to borrow as much money as it had planned to pay for the long-term infrastructure improvements.
"It's so much cheaper to destroy demand than to satisfy it," said LIPA trustee Mark Fischl. "That is something we absolutely have to do."
PSEG spokesman Jeff Weir said the company plans to pursue competitive bids "that attract the best and most cost-effective market-based, innovative solutions in the high-priority load pockets of Montauk, Far Rockaway, and Glenwood to help meet geographically specific future energy needs."
Weir said the solutions could include energy efficiency measures and battery storage, among other measures.