LIPA is stepping up its seven-year effort to lower the taxes it pays on major power plants, offering less attractive settlements to reduce future tax payments. It also is questioning the economics of long-awaited plant upgrades.
Last week, senior Long Island Power Authority officials presented data showing that only about 20,000 Long Islanders reap outsize benefits from the $189 million LIPA pays each year in taxes for power plants in their districts. All 1.1 million LIPA ratepayers foot the tax bill on the four National Grid-owned power stations, in Northport, Island Park, Port Jefferson and Glenwood Landing. LIPA earlier this decade began filing tax challenges to lower the payments, but the cases have been slow to move through the courts.
LIPA’s presentation also calls into question the wisdom of overhauling the plants, saying the influx of renewables over the next 13 years and reduced savings from lower natural gas prices could render upgraded plants obsolete, or “stranded assets.” Advocates for so-called repowering have long assumed the plants would be upgraded, increasing their usefulness and value while reducing emissions.
In addition, in court-ordered settlement discussions with municipalities and local taxing districts in recent months, LIPA is reported by one village official to have sharply shortened the period over which it would reduce plant taxes to make the loss of revenue less painful for the districts.
Port Jefferson Mayor Margot Garant said LIPA’s most recent offer was to cut the plant’s tax assessment by 67 percent over six years. LIPA in a 2013 plan brokered by the state offered to ramp down the tax payments over a 10-year period.
‘You just can’t cut us off’
Garant said the shorter window would “devastate” a school district that gets the bulk of LIPA’s $28 million annual payment for the rarely used Port Jefferson plant. Port Jefferson, she said, had been pushing for a 10- to 15-year glide path to lowering the plant’s taxes, at an annually reduced rate of 3.75 percent.
“You just can’t cut us off at the kneecaps with half the valuation,” Garant said. “Six years is a very steep adjustment.”
Added Brookhaven Supervisor Edward P. Romaine, “Every time we try to move closer, they [LIPA] move farther away from our goals.” He said he expects the issue won’t be resolved in court, but rather through legislation that would provide for “a reduction in assessment if there’s some state aid for the taxing jurisdictions.”
A LIPA official said that the tax phase-down offer had been reduced to eight years, not six.
“LIPA made a ten-year settlement offer four years ago that was rejected by the taxing jurisdictions, so it’s now an eight-year offer on similar terms,” the official said in a written statement Sunday. “We have a responsibility to all of our 1.1 million customers who are paying much more than their fair share of taxes on these plants.”
LIPA pays about $535 million a year in taxes and related payments, which accounts for about 15 percent of customer bills. The $189 million annual tax bill for the plants includes $76 million for the Northport plant, $36 million for the E.F Barrett plant in Island Park, and $17 million for the remains of a dismantled plant in Glenwood Landing.
On a per-megawatt basis, LIPA showed its tax payments to be inordinately higher than taxes on other plants in the state. For instance, LIPA pays more than $3,695 per megawatt for Glenwood Landing and $70 per megawatt for Port Jefferson in taxes, compared with about $2 per megawatt for the 2,150-megawatt Indian Point nuclear plant in Westchester.
LIPA noted that the $17 million in annual taxes on the sharply downsized Glenwood facility are nearly twice those of the highly used Caithness power plant in Yaphank, for which it pays annual taxes of $9 million. Two small so-called peaker plants at Glenwood ran only twice last year, LIPA said.
Meanwhile, new LIPA data gleaned from a long-awaited power-resource study by PSEG Long Island suggests residents in the districts with plants shouldn’t bank on power-plant overhauls to increase the value of the facilities.
Declining summer use seen
As reported in Newsday, LIPA and PSEG Long Island are projecting declining peak-summer power use on Long Island for the next three years, then a marginal increase over the next 15 years through 2035. That is a stark difference from previous estimates that saw major growth in peak power use over that period.
One senior LIPA official, who asked not to be identified, suggested the new analysis gave LIPA more options when planning out the system during that period, because no new baseload power plants will probably be needed in that time. For the Port Jefferson plant, the official conceded, “We wouldn’t have to put a dollar into transmission to shut down that plant.”
The long-term power study “makes us a little reluctant to pull the trigger on the base-load [larger] plants” when it comes to spending hundreds of millions or more to repower them, the official said.
Huntington Town spokesman A.J. Carter declined to comment on LIPA’s assessment of repowering the plants until its officials “have a chance to read and analyze the study.” Last month, Carter said, “If they [LIPA] commit to repowering the Northport plant, the town will freeze the assessment and not add in the value of any improvements that would be the result of repowering.”
The LIPA analysis showed that relatively few customers get the bulk of the benefits of its tax payments. In the Town of Huntington, for instance, 10,586 customers each get an annual $2,505 benefit from LIPA tax payments, while 70,626 town taxpayers get a $50 benefit because the plant benefits primarily those in the Northport-East Northport school district. If LIPA wins the challenges in court, LIPA said, all 70,626 residents could be liable for $500 million in back taxes. Average customers pay $272 a year to LIPA for all taxes and related costs.
In Brookhaven, 3,542 customers get a $2,869 annual benefit each a year from payments for the Port Jefferson plant, primarily in the Port Jefferson school district, while 169,713 town residents get a $2 benefit, LIPA said. Yet, if Brookhaven is forced by the court to pay back taxes should LIPA win the court challenges, all taxpayers could be liable for $195 million-plus. Similar scenarios were shown for the towns of Hempstead and North Hempstead, where the Island Park and Glenwood plants are located.