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DPS recommends lower rate hike for PSEG over three years

A PSEG Long Island utility worker works on

A PSEG Long Island utility worker works on restoring power in East Setauket Tuesday afternoon on Aug. 4, 2015. Credit: James Carbone

The state Department of Public Service released a final recommendation for electric rates on Long Island that would allow PSEG-LIPA to raise rates by a cumulative $325.4 million over the next three years.

If adopted, the recommendation would result in average residential electric bill increases of 0.8 percent, 2.1 percent and 2.1 percent over the next three years, the department said.

The recommendation largely mirrors a draft by an advisory panel of the department, though both are more than $60 million below the $387 million PSEG Long Island said is necessary to meet top rankings for utility performance.

In a 175-page report on the ruling, the department said, "While no one likes price increases, it is critical that service on Long Island remain reliable and secure."

The recommendation goes to the LIPA board of trustees next month for final approval. A majority of LIPA trustees are appointees of Gov. Andrew M. Cuomo.

The final recommendation, released Monday night, took note of but ultimately rejected PSEG's claim that a lower revenue amount would hurt its ability to reach top-level service targets and earn extra incentives, and ultimately violate its contract with LIPA. The department said its lower recommended revenue "will enable PSEG LI to continue to provide improved electric service."

The final ruling sides with previous state advisory findings that PSEG sought too much for tree-trimming around wires, inspecting poles and other measures, even though it allows for increases in those budgets.

The rate increase, if approved, comes with several backup measures that would allow LIPA and PSEG to hike rates (or lower them) in the future if costs and projected savings related to storms, labor contracts and debt refinancing differ from current projections. This ability to adjust rates was largely opposed by ratepayers in public hearings, and by state senators in a letter to the state. One LIPA trustee called it a "blank check" for future increases.

The final ruling also rejected claims by Nassau County and Brookhaven Town that the rate proceeding proved insufficient to justify any rate increase. The ruling said that claim was "not supported by the record."

Former LIPA trustee Sheldon Sackstein, now chairman of the Suffolk Legislature's Utility Oversight Committee, called on LIPA trustees to reject any increase, or stall a vote until further review can be conducted. He is leading an effort to overhaul the LIPA Reform Act.

"I don't think the public really understands or has the time to take a close look at what that legislation meant and what that means in the long term," he said.

PSEG spokesman Jeff Weir said the utility "will carefully evaluate the recommendation," and "it is our hope that the three-year rate plan provides the resources necessary to deliver on our promises."

LIPA declined to comment.

The increase would apply only to the delivery charge portion of bills, which has remained relatively unchanged during LIPA's 17-year history. The power supply charge, which fluctuates month to month with natural gas prices, could raise or lower bills beyond that.

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