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State DPS to revise testimony calling for LIPA, PSEG to reduce rate hike request

PSEG Long Island recently invested $4.8 million in

PSEG Long Island recently invested $4.8 million in two infrastructure upgrade projects in Huntington and Elwood. These trucks are leaving a service yard on Jan. 1, 2014. Photo Credit: Newsday / J. Conrad Williams Jr.

The state Department of Public Service will revise its testimony calling for a 78 percent reduction in the LIPA-PSEG rate hike after finding "mechanical accounting variances" in its numbers.

In a letter to administrative law judges overseeing the case, DPS Long Island staff lawyers Wednesday did not elaborate on the variances, or their impact on the prior DPS filing. The department will file the revised testimony Monday.

A person familiar with the matter said the revision is no small matter.

"It's huge," said the person. "It's not a little blip. It's a major mistake."

The action is almost certain to complicate an already condensed schedule for the rate proceeding, in which the utilities seek three years of 4 percent annual increases.

The reference to "accounting variances" could mean that the staff's finding last month that the utilities' $221 million rate request should be cut by 78 percent may be reined in. If so, it would be a blow to the staff's first-time audit of the utilities' rate-hike request. The rate hike proposal has drawn widespread opposition from political leaders across Long Island.

DPS recommended cutting the $221 million revenue hike to just $47.8 million, finding that LIPA and PSEG had overprojected for inflation, that it underestimated its three-year revenue forecast by $29.6 million, and that savings from a debt refinancing could bring an additional $109 million.

While it remains unclear which if any of those figures will be restated, DPS Long Island director Julia Bovey said filing revisions are routine in rate cases.

"In any DPS utility rate case there are many back-and-forth exchanges of information and assumptions to determine the correct level of funds necessary to ensure reliable service at the least cost to the ratepayer," she said.

PSEG papers filed Thursday found that DPS's forecast for electricity sales was "unsupportable," including a 2015 expected growth rate of 2.6 percent that "has not been approached in 10 years." The testimony doesn't discuss its impact on revenue dollars.

"That high forecast for 2015 is carried forward through the subsequent years, rendering its entire forecast for the years 2015-2018 unacceptable," PSEG said in its filing.

PSEG also found that DPS changes in its tree-trimming cycle and cutting $9.7 million from that budget in 2016 and 2017 would result in "roughly 50,000 more vegetation-related outages" over the three years.


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