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Cut PSEG Long Island new revenue collections from ratepayers, says New York State DPS panel

A PSEG Long Island crew performs work on

A PSEG Long Island crew performs work on Montauk Highway in West Islip on July 10, 2014. Photo Credit: Newsday / John Paraskevas

An advisory committee of the state Department of Public Service has issued a draft recommendation that would cut the amount of new revenue PSEG Long Island could collect from ratepayers over the next three years by 19 percent, to $324.6 million.

PSEG and LIPA had most recently sought $387 million in cumulative new revenue from ratepayers. Staff at the Long Island office of the Department of Public Service, which is not part of the advisory committee, had sought to reduce the new revenue number to $290 million.

Major differences over what PSEG and LIPA proposed and what the department seeks to cut include costs related to trimming trees and inspecting poles, sales forecasts and other items.

The draft report of the advisory committee, which consists of two administrative law judges and four Albany officials from DPS not connected with the DPS Long Island office, is not the end of the process. The report issued Friday will be available for public comment and a hearing early next month.

Opposition briefs must be filed Sept. 11, and the chief executive of the department, Audrey Zibelman, will issue a final ruling by the end of September. Then, LIPA board members will vote to approve or amend it before year's end.

The latest recommendation would allow PSEG and LIPA to collect new revenue through rates of $28.8 million in 2016, $78.5 million in 2017 and $81.3 million in 2018. Each $40 million in revenue represents a 1 percent bill increase for ratepayers. PSEG and LIPA had originally sought to collect about $72 million in new funds each year.

The draft report recommends allowing LIPA to institute a mechanism called a delivery service adjustment so LIPA could recoup costs related to a $2.5 billion debt refinancing if savings from the transaction do not meet LIPA's latest estimate of $172 million in three-year savings. Long Island DPS projected LIPA could see $192 million in savings during the rate period.

The report also sides with Long Island DPS staff in requesting that PSEG lower its budget for tree trimming to $17.4 million a year. PSEG had proposed spending $27.4 million a year for two years to trim trees, and a third year at $17.75 million. The program mitigates damage to the system from storms and wind.

The report also endorses a lower utility pole inspection program of $2.5 million a year, below the $3.2 million a year PSEG had sought.

The draft takes exception to PSEG's assertion that many of the expenses PSEG seeks are guaranteed by the contract that LIPA and Gov. Andrew M. Cuomo's office made with PSEG in 2013. " . . . We will not be persuaded by assertions that any and all forecasted expenditures must be accepted 'as is' simply because they may pertain" to the contract, the report said.

PSEG spokesman Jeff Weir called the most recent report "a step in the process," and said the company would review it. He declined further comment.

LIPA spokesman Sid Nathan declined to comment. The DPS committee rejected the notion that the record from months of testimony, hearings and briefings was insufficient to support a rate increase, as Nassau County and Brookhaven Town had asserted. Brookhaven had noted a $124 million error in the original Long Island DPS report in making its case.

"We find that this process has resulted in a record that is sufficiently robust that it allows the department to meet its obligation to make recommendations to the LIPA" board, as required by the LIPA Reform Act, the report said.

Rob Calica, an attorney for Brookhaven, disagreed, calling the draft report "very disappointing but not surprising," and adding the town intends to file an opposition to the draft by Sept. 11.

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