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LIPA OKs continuing to collect expired tax

David Daly, president and COO of PSEG Long

David Daly, president and COO of PSEG Long Island, left, speaks while sitting next to Vice President William Johnson, right, during a metting where LIPA trustees voted on a series of changes to its rate-making rules. Credit: Steve Pfost

LIPA trustees Thursday approved changes to rate-making rules to allow PSEG Long Island to continue to collect funds for a now-expired state tax and apply the money instead to system improvements.

Only one trustee, Marc Alessi, voted against the measure, which lets PSEG collect $26 million a year that previously had applied to a state revenue tax, from which LIPA is now exempt. LIPA will also continue collecting a separate and related $6.9 million charge even though the debt that it went toward has been paid off.

"I thought it could have been passed on to ratepayers," Alessi, a former state assemblyman, said after the meeting, explaining his no vote.

PSEG Long Island president David Daly said the money was important to fulfilling the company's promise to improve service while holding rates stable.

"You can't improve operations without some increases" in system investment, he said. "These two [funding sources] represented some head room to invest back in the front lines."

At the same time, LIPA chief executive John McMahon said PSEG will announce a reduction in the power supply charge next month after six straight months of increases. PSEG spokesman Jeff Weir said the figure would drop to 10.4 cents from a current 12.3 cents per kilowatt hour. Ratepayers have been complaining of excessively high rates through the winter, as the charge rose with natural gas prices.

McMahon also announced that PSEG will work with LIPA to review plans for a 750-megawatt power plant in Yaphank called Caithness II. LIPA at one point had planned to sign a power purchase agreement for the plant early this year. McMahon said a review by PSEG should be complete by year's end, and that the planned 2018 start date for Caithness II "still holds." LIPA trustees are expected to vote on the contract sometime this year.

Daly said PSEG will draw on resources from its own power generation unit in New Jersey to review the plant proposal, which will look at how the estimated $3 billion plant will affect rates, its necessity and other factors. Lawmakers have recently questioned the need for the plant's full 750 megawatts.

"We are able to draw on resources from New Jersey and elsewhere" to review the plant, and other LIPA projects, he said.

McMahon said LIPA also would review so-called repowering proposals, notably the Port Jefferson power station, which he called "an important part of Long Island's going-forward [power] resource plan."

Residents from East Hampton and Port Washington spoke passionately at the meeting about in-progress transmission line projects in their districts, urging LIPA and PSEG to halt work on the high-voltage lines, stop cutting trees and work instead to bury the six-mile cables.

PSEG is working with residents on proposals to move the lines underground, but has insisted that residents agree to fund the bulk of the costs. Both overhead projects are expected to be finished by June 1, and the work to replace and remove them, if successful, done in 18 to 24 months.

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