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PSEG Long Island, LIPA agree to slightly reduce new rate collections

PSEG Long Island trucks leave a service yard

PSEG Long Island trucks leave a service yard on Jan. 1, 2014. Credit: Newsday / J. Conrad Williams Jr.

PSEG Long Island and LIPA have agreed to slightly reduce the amount they would collect in new rates over the next three years, while endorsing a state plan to "update" rates in 2017 and 2018 to reconcile a range of estimated costs.

In testimony filed Wednesday on their three-year rate hike proposal, LIPA and PSEG cut around $66 million -- from $440 million to $374 million -- from the total amount of new revenue they expect to collect from ratepayers between 2016 and 2018. In doing so, they cited certain aspects of a review by the Department of Public Service, which separately this week admitted a $124 million "miscalculation" in restating its rate review.

The lower revenue means the three years of delivery-charge increases on customers' bills would be slightly lower than the 3.8 to 3.9 percent that PSEG originally requested. PSEG previously said the increase was $3.27 a month more for average residential customers in each year of the three years. A revised monthly figure wasn't available Wednesday.

But PSEG also said it "strongly disagreed" with DPS' recommendation to cut $20 million from the rate hike through lower PSEG operating expenses in 2016. And in an unexpected move, it disagreed with the department's call for a $79.7 million rate hike in 2018, which is $12 million more than what PSEG and LIPA is now requesting.

In documents filed Wednesday, LIPA finance chief Tom Falcone also endorsed a state recommendation to allow for an update of rates in two of the next three years. Falcone outlined a schedule for the "second-stage update" and categories of costs the utilities would like to recover in future rates, replacing estimates with actual costs.

For instance, LIPA would be allowed to collect new rates if a planned refinancing of $2.5 billion in debt doesn't achieve the expected $155 million in savings by next year. Other cost categories that could be recovered by the second-stage review include labor negotiations with PSEG's unionized work force next year, interest rates on variable-rate debt, taxes paid on LIPA-owned properties that are currently in tax-grievance proceedings and costs imposed by new laws, regulations or court decisions.

LIPA trustees and DPS would receive the "second-stage submittal" to update rates in November of 2016 and 2017. After public hearings, trustees would vote on the rate update by December. New rates would be effective Jan. 1, 2017 and 2018.

The utilities already have requested a mechanism called a delivery service adjustment that would allow them to recover costs for storms, National Grid power plants and the planned debt offering during the course of the rate increase. LIPA also has recently adopted a mechanism called revenue decoupling that allows it to recover all fixed costs if its annual revenues come in lower than it projected.

The mechanism would require LIPA to return money to ratepayers if sales come in above projections.

A DPS spokesman said utilities' rebuttals and the department's testimony "will be reviewed as part of the process."

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