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LIPA’s 2017 budget will hike bills $2.56 a month

Electricity usage by LIPA’s 1.1 million customers is projected to decline again next year, but LIPA’s 2017 budget will increase by some $222 million as the authority implements a state-approved rate hike and makes other adjustments that will increase average residential bills by around $2.56 a month.

In addition to paying the bill for unexpectedly high storm costs this year, the Long Island Power Authority said the proposed 5 percent revenue increase for 2017 will fund an ongoing plan by PSEG Long Island to improve system reliability and increase customer satisfaction.

“We are basically on plan,” LIPA chief executive Tom Falcone said. “The good news is we are investing a record amount on reliability and customer service.”

PSEG’s customer satisfaction rating has steadily increased since it took over Jan. 1, 2015, but two vital measures of its performance in 2017 could end the year below LIPA targets, PSEG said in September.

LIPA will hold a workshop on the budget on Tuesday at its headquarters and will hold two public hearings Nov. 28. The LIPA board is expected to vote on it Dec. 20.

LIPA’s total 2017 budget will jump to $3.59 billion from $3.392 billion this year. Most of the increase is tied to higher power supply charges, including an anticipated jump in fuel costs, increased operating and administrative expenses, higher property-tax assessments for power plants and an increase in debt service, according to LIPA’s budget.

LIPA expects fuel and purchased power costs to increase by around $157.8 million in 2017, to $1.49 billion from a projected $1.33 billion in 2016. The increase is tied to anticipated higher fuel prices, particularly natural gas, new renewable power sources and new “zero emission credits” to fund upstate nuclear plants as part of Gov. Andrew M. Cuomo’s clean-energy standard. LIPA’s annual share of that nuclear plant subsidy is $45 million.

LIPA projects that total sales of electricity, a measure of customer usage, are expected to drop to 19,521,596 megawatt hours next year from a projected 19,997,663 megawatt hours this year, and then drop again in 2018, reflecting a surge in the adoption of renewables such as solar and adoption of more energy efficiency measures.

LIPA’s taxes, including payments in lieu of taxes and state and local taxes, are projected to increase from a projected 2016 level of $535.9 million to $538.5 million next year. Taxes in 2018 will jump again, to $548.9 million.

PSEG’s operating expenses are projected to jump to $556.7 million next year, around $28 million higher than 2016 levels. PSEG’s storm costs in 2016 are projected to end the year at $116.4 million, considerably higher than the $48.2 million budgeted for the year.

LIPA expects total debt to jump to $7.946 billion in 2017, up from a 2016 projected amount of $7.843 billion.

LIPA administrative costs will increase $4.5 million, including $3 million tied to higher employee salaries and benefits (to $12.6 million next year from this year’s $11.2 million) and LIPA professional services. Authority expenses also include a $1.5 million one-time charge tied to a Department of Public Service management audit of LIPA that will take place next year.

Debt service will grow from a projected $622.9 million this year to $660.7 million next year. Debt service in 2018 will increase to $694.3 million. Most of the increase reflects a new program to fund infrastructure improvements through cash rather than debt. Interest expense in 2017 is projected to be $337.3 million next year, then $339.2 million in 2018.

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