LIPA trims rate hike to $287 million

The Long Island Power Authority continued Thursday to fine-tune a three-year rate proposal that once sought $441 million more from customers as it announced that it would hike rates by $287.4 million.

The latest figure includes $38 million in savings from a recently completed bond offering, and lower anticipated property taxes.

LIPA's budgets for the next three years also include projected fuel costs to be $1.1 billion lower than previously forecast.

Accordingly, LIPA's 2016 budget will decline to its lowest level since 2009, to $3.369 billion, a 5 percent reduction from the $3.55 billion 2015 budget. Customer bills next year are expected to rise about 0.5 percent.

The largest component of the 2016 budget reduction is for fuel and purchased power costs that are projected to be $348.4 million lower than previous rate-plan estimates. Fuel and power charges, which are adjusted monthly on customer bills and largely reflect the cost of natural gas, are based on estimates of "current prevailing costs," LIPA said. The charges could increase or decrease during the year and in coming years.

A senior LIPA executive called the figure a "reasonable projection of what we are going to pay based on prices that we are seeing now" and on future hedged prices. "We've been under budget for fuel and purchased power all year and it looks like we'll be even more under budget in 2016," said the official.

LIPA trustee Matthew Cordaro said a decline in fuel costs is far from guaranteed.

"You can't take that to the bank, that's for sure," said Cordaro. "The projections can be off significantly by next year, as our projections have been in the past."

LIPA in a budget presentation said the anticipated decline in fuel costs could reduce the overall customer rate to 19 cents a kilowatt hour by 2018, which would be its lowest level since 2009.

The three-year revenue increase of $287.4 million is $38 million lower than the $325.4 million the state Department of Public Service ultimately determined LIPA could raise rates. LIPA is authorized to adjust rates each year depending on actual costs for items such as labor, debt savings, storm costs and its primary power contract.

LIPA's budget will be discussed at a workshop at its headquarters in Uniondale Friday at 9 a.m.

Release of the spending plan follows generally improved outlooks for LIPA from Wall Street bond rating agencies, based in part on the utility's plan to fund more of its long term infrastructure projects with cash instead of debt.

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

Mark Harrington, a Newsday reporter since 1999, covers energy, wineries, Indian affairs and fisheries.