A LIPA electric meter in a Garden City residence on...

A LIPA electric meter in a Garden City residence on June 4, 2013. Credit: Newsday / Audrey C. Tiernan

LIPA and PSEG Long Island on Thursday are holding public hearings on the $3.6 billion budget for 2015.

The annual budget holds the delivery charge portion of ratepayer bills steady through the year, and cuts LIPA's budget for salaries, consultants and administrative costs as the utility reduces staff from 50 to 40 people.

Release of the 2015 budget comes as LIPA and PSEG are preparing to make a case for rates in the 2016 through 2018 time period, when they are widely expected to request an increase.

LIPA's financial adviser, PFM Public Power Group, also is recommending that the authority hike rates beyond its operational expenses to begin accumulating a larger cash hoard. The move would improve LIPA's current low credit rating, reduce its reliance on debt and pay for certain long-term projects, the adviser says.

LIPA won't say how much that long-term approach would cost ratepayers, but even if it were just $72 million annually, it would lead to a 2 percent hike in bills.

Thursday's public hearings, scheduled for two hours, are to start at 10 a.m. in Nassau, and at 4 p.m. in Suffolk. The Nassau hearing is in the legislative chamber of the Nassau County Legislature building, 1550 Franklin Ave., Mineola. The Suffolk hearing is in the media room of the H. Lee Dennison Building, 100 Veterans Memorial Hwy., Hauppauge.

LIPA's proposed 2015 budget of $3.6 billion is a $74 million increase over last year, reflecting an anticipated $80.4 million jump in fuel and power costs next year.

A separate capital budget proposes spending a record $677.8 million on longer-term system improvements, with most of the money coming from government grants.

LIPA is projecting a slight increase in electric sales next year, despite several years of flat or declining sales. PSEG Long Island's operating expenses for 2015 are budgeted at $458 million, a $37.6 million reduction from 2014.

LIPA's internal expenses are expected to drop next year as it cuts staff to 40 people from a current 50. Salaries and benefits for the 40 remaining executives and staff are a proposed $10.1 million; administrative costs are $5.5 million, a drop of $1.2 million. Professional services and consulting costs are expected to decline $7.9 million from 2014, to $9.9 million.

While overall rates will hold steady next year, the delivery charge for 2015 will be increased to 10.7 cents a kilowatt hour from a current 10.46 cents, LIPA said, to offset reductions in the efficiency and renewables charge on bills and a lower state assessment.

LIPA's 2015 budget introduces the concept of revenue decoupling to the utility's finances. The measure allows utilities to recoup system costs even as demand declines -- which is intended to provide an incentive to cut user consumption even in the face of declining sales. The LIPA version would incorporate efficiency and renewables reductions, and allow LIPA to recoup expenses even if sales are influenced by unexpected weather.

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