Wind farms' impact on average Long Island electric bills rises to $3.54 a month

The average residential electric bill impact for two offshore wind farms off Long Island has increased nearly fivefold since 2019 to an anticipated $3.54 a month, according to state data, fueled by soaring construction costs and new projections for the price of wholesale energy.

When former Gov. Andrew M. Cuomo first announced Empire Wind and Sunrise Wind farms at a 2019 conference in Manhattan, the state announced the impact on average New Yorkers would be "less than a dollar per month per customer," or "approximately 73 cents."

Much has changed since then.

Nearly seven years later, amid ongoing challenges to the nascent U.S. offshore wind industry, the estimate continues to adjust upward, to $3.54 per month by 2028, when the projects are expected to be producing power, according Marco Padula, director of markets and innovation for the state Department of Public Service, which conducts the price-impact study.

The $3.54 is a projected "levelized" cost over the 25-year life of the contract, he noted, adding market trends can sway the figure in either direction in the future.

The impact on commercial customers using considerably more power each month would be higher. Figures for the impacts across all state utilities are contained in a DPS report released in September.

The costs of subsidies to fund the wind farms are shared by ratepayers across the state under a complex cost-sharing mechanism called ORECs — offshore wind renewable energy credits.

But there’s a footnote to those figures that has not been widely publicized: LIPA has yet to sign on to the pricing scheme that would obligate its 1.2 million ratepayers to become part of the pool that is paying the cost for the wind farms. Doing so by negotiating a contract for the offshore wind renewable energy certificates, which is expected, is "voluntary" for LIPA, which is not under the state Public Service Commission’s direct jurisdiction.

"Even though we don’t have jurisdiction directly over Long Island we always try to emphasize it would be nice if you voluntarily choose to also participate because these things like carbon are not a localized issue, they’re a climate issue," Padula said.

Sunrise Wind will chiefly benefit Long Island, while Empire Wind's power will connect to the New York City grid in South Brooklyn.

LIPA signing onto the state offshore wind subsidy program could mean average bills could be less than the projected $3.45 a month because Long Island ratepayers would be added to the statewide pool and that would lower the average. However, the state noted that that's not certain.

Neither LIPA nor the state would say when an agreement would be formalized.

When Gov. Kathy Hochul in 2024 announced new contracts for both projects, she said the bill impact would be a combined $2.09 per month.

Asked if Orsted, Sunrise Wind's developer, affirmed the state’s $2.09 bill impact figure, Meaghan Wims, a Sunrise spokeswoman, said the New York State Energy and Development Authority, which administers green energy contracts across the state, "would be best positioned to comment on ratepayer impact." A spokesman for Equinor, Empire Wind's developer, noted the $2.09 figure was quoted in a NYSERDA release when the projects were awarded new contracts.

NYSERDA has declined to disclose construction costs for the projects or provide detailed insight into how the state arrived at the original 73 cents and more recent $2.09 a month.

John Howard, a former PSC chairman and commissioner who left the agency in 2023, called "opaque" the state’s mechanism for showing how the projects would impact customer bills. He was there when the PSC voted unanimously against adjusting the contracts for Empire and Sunrise because of increased costs, and said he consistently voted against a state cost-sharing mechanism that charges customers across the state for projects that may benefit one specific region.

"When the regulator [the PSC] had an opportunity to say no, they said no," he said. "And what happened: the non-regulator [NYSERDA] said yes" and rebid the contract.

Both the Empire and Sunrise projects have seen their construction costs skyrocket since they were first awarded by the state in 2019. Last month, Newsday reported the cost for the two projects off Long Island had ballooned to a combined $13 billion, according to recent court filings.

The Sunrise tab was $7 billion and Equinor had previously said in court filings that $4 billion had been spent to date on Empire Wind, and another $2 billion would be spent this year. Earlier this month, Equinor told shareholders the cost for the project would come in higher — an expected $7.5 billion by the time the project was complete next year.

The new tally for both projects of $14.5 billion is more than double initial estimates.

By comparison, another project that is also under construction, Coastal Virginia Offshore Wind, has a projected $11.5 billion price tag and is already charging average residential customers $11 a month for the project, said Jeremy Slayton, spokesman for developer Dominion Energy. He noted that average residential customers are expected to see a net credit of 57 cents a month over the life of the project when renewable credits and capacity and energy benefits are included.

The updated cost of $3.54 a month is reflected in a report put out by the Public Service Commission each year, and reflects the latest levelized costs anticipated for the projects by the time they come online in the next two years.

Jonathan Lesser, a senior fellow with the conservative-leaning National Center for Energy Analytics, said his own analysis puts the average monthly cost for the two projects at $7.74 a month based on estimated annual production of more than 7 million megawatt-hours and the costs to purchase the energy divided among more than 8 million customers across the state.

LIPA’s South Fork Wind Farm, already contributing a steady supply of offshore wind to the Long Island grid at East Hampton, resulted in payments to owner Orsted of about $42 million in 2024, when the project delivered power for around half a year. LIPA said the project remains in line with average costs to residential customers of about $1.60 a month.

A LIPA price schedule shows costs will increase over time, however. The base capacity contract price for energy from the South Fork Wind farm starts at $160.33 per megawatt hour in its first year and increases to $237.45 by the 20th year of the contract, according to LIPA documents. The structure of increasing payments is distinct from Empire and Sunrise wind's payment structure.

Padula said the estimated residential customer bill impacts for the Empire and Sunrise wind farms are purely that: forecasts based on the latest information about energy and capacity market prices.

Those are measured against the state’s agreed to "strike" price for renewable energy — the minimum the developers will receive for each megawatt hour of energy — with the wind-farm company to determine how much extra state ratepayers fork over each month.

In the case of Sunrise, the average monthly energy market price is subtracted from the $146 per megawatt hour strike price to determine how much of a premium Orsted is to receive for wind-farm’s power. If average market prices in a given month were, say, $100, that would mean the state is on the hook for the $46 for every megawatt hour produced during the period.

Conversely, if the average market price goes above the strike price, the state would get a credit for amounts above the strike price

Empire Wind's strike price is $155 per megawatt hour

Higher OREC payments to the developer are the result of lower overall energy and capacity prices estimated by DPS, Padula said, because the lower the market prices, the greater the delta between it and the strike price — hence the higher wind credit.

He noted that market prices for energy in New York have been in the $300 to $400 a megawatt hour range in recent weeks, signaling that offshore wind, had it been available, would have been cheaper.

Padula said the strike prices for Empire and Sunrise are fixed for the 25-year life of the contracts, with rare exception. "Let’s say somehow their costs increase by $50 million, $100 million. They have to eat that," he said. "They are subject to the strike price."

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

Mark Harrington, a Newsday reporter since 1999, covers energy, wineries, Indian affairs and fisheries.