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LIPA exceeds 2017 storm budget as summer storm season looms

The summer storm season hasn’t yet begun, but LIPA and PSEG Long Island have already exceeded their budget for 2017 storm response, after spending $19 million in March for a storm that didn’t deliver the expected wallop.

The utility has spent a total of $38.7 million on storms as of the end of April, according to recently released figures. The $19 million spent on the mid-March storm, which had initially been projected to be a heavy-hitting blizzard, but fizzled out as it moved farther west, ate up more than half the $34 million budget for storms for the year.

The spike in 2017 storm spending comes as the National Oceanic and Atmospheric Administration this week said it expects to see “above-average” storm activity in the Atlantic this storm season.

LIPA officials said during a May 24 board committee meeting that it would apply for FEMA funding to help recoup some of the $19 million spent responding to the March storm. PSEG had called for up to 1,500 workers from as far away as Florida to help respond to the storm. When it weakened, the utility told 736 workers who had been on their way to Long Island to turn around and return home. Outages numbered about 25,000 in total.

John O’Connell, vice president of transmission and distribution for PSEG, said $19 million costs for the March storm were “average” for such a “large mobilization” of outside and on-Island crews. The early hit to the budget, he said, isn’t expected to be a problem for the rest of the year because PSEG works with LIPA to spread above-budget storm costs over multiple years.

Still, he said, “If we had storms like that every month it would become a cost issue. They don’t come along that often.”

PSEG, he said, is aware that forecasters are predicting an above-average year for storms. “We just have to plan for it. We look week by week, and forecast by forecast, to make our decisions,” O’Connell said.

The utility in 2016 also exceeded its budget for storms, spending $110.7 million for the year against a budgeted $48.2 million. That overage came under fire during a board meeting in March, when board member Jeff Greenfield noted he was “troubled” by the excess and said the utility has to do “a better job.”

“I know we want to be prepared, we want to be conservative, we want to make the governor proud that we’re not in distress here on Long Island if and when the storm does occur but we paid a price for it,” he said. “I don’t think that’s good for the ratepayers. I’m troubled by it. . . . That’s a lot of money to go over.”

LIPA chief Tom Falcone at the March meeting shot back: “I completely, totally, absolutely disagree with the thought that we wasted money, because when you respond to storms you’re taking out an insurance policy. And it will always be the case that in some cases you pre-position resources because you’re expecting a very bad storm and it doesn’t happen.”

Being prepared for a quick restoration after storms, Falcone said, is “the number-one thing our customers want from us. They want reliable service including when there’s a storm.”

The budgeted number is always an estimate, with flexibility for PSEG, which operates the system under contract to LIPA, to exceed or underspend. LIPA in 2016 enacted a measure that allows it to recoup storm costs over a three-year period through an adjustment in rates when it exceeds the budget. When it ends the year in excess, the amount is banked to defray future costs.

The utility’s total budget for storms is slightly lower this year, PSEG said in the documents, because of “assessments” that were removed from the storm budget compared with previous years.

The number of storms last year was the highest since 2012, when superstorm Sandy and other lesser storms pushed LIPA to exceed the budget by $706.5 million. But that entire overage was reimbursed by the Federal Emergency Management Agency.

In 2011, LIPA’s budget of $46 million was exceeded by $180.6 million, as actual storm restoration costs amounted to $226.6 million.

There have been six “major” storms declared in 2017 thus far, according to the PSEG figures. Two of those storms prompted PSEG to request crews from out of town. That compares to 21 storms in 2016 that required outside crews on five separate occasions.

LIPA in 2010 endured withering criticism for a decision to call for 1,600 off-island workers in advance of Hurricane Earl, which largely fizzled out before reaching Long Island, incurring some $32.7 million in costs.

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