State lawmakers question DPS on oversight of LIPA's rates

State lawmakers from Long Island are pressing the Department of Public Service about its oversight of LIPA’s rates following a Newsday story that found customer delivery rates and bills have been increasing by more than 4% annually in recent years.

At issue are the factors that LIPA and its contractor, PSEG Long Island, use to determine whether each year’s increase reaches a threshold that would trigger a full rate review and an exhaustive rate proceeding under state law.

Before the passage of Gov. Andrew M. Cuomo’s LIPA Reform Act of 2013, LIPA couldn’t increase customer rates more than 2.5% "without approval of the PSC following a full evidentiary hearing," the lawmakers noted.

The Reform Act changed the language to "any rate proposal that would increase rates and charges and thus aggregate revenues of the authority by more than 2.5% to be measured on an annual basis."

In 2022, PSEG’s analysis found applicable revenues would increase to only 2.1% — just under the 2.5% trigger — despite a 4.5% increase in the base delivery rate portion of customer bills, according to the Newsday story last month.

The lawmakers, led by Assemb. Steve Englebright (D-Setauket), are questioning both the formula PSEG used to calculate the 2.1% figure and whether the state department conducted its own independent analysis.

Newsday’s story quoted DPS spokesman James Denn as pointing to PSEG's analysis to justify the 2.1% figure, a fact that rankled the lawmakers, who include Assembs. Charles Lavine (D-Glen Cove), Fred Thiele (I-Sag Harbor) and eight others from Long Island. In a letter Thursday to recently named DPS-Long Island Director Carrie Meek Gallagher, they said they found it "highly questionable whether the Long Island [DPS office] performed any analysis or review of the assumptions" made by PSEG.

"We find it difficult to believe [DPS-Long Island] would determine whether or not to schedule a major rate case for a proposed 4.5% nominal rate increase on the simple say-so of a utility that the overall impact would fall below 2.5%, or on a superficial glance at documents that an applicant had not affirmed or attested to," they wrote.

DPS spokesman Denn, in a statement to Newsday, said a full rate-case review was not triggered in 2022 "because the gross aggregate revenues did not exceed 2.5%, the required amount for a rate case review."

Denn said the DPS Long Island office "carefully examined and confirmed that PSEG-LI’s proposed rate did not trigger the 2.5% threshold for aggregate revenues," and said the office will review Englebright’s letter and respond to him directly.

LIPA, in a statement, said its 2022 budget was "developed through an open, transparent process that recognizes the challenges that many customers are experiencing and complies will all relevant state laws and regulations. While LIPA’s revenue requirement will increase by just over two percent, when all factors are considered, we project bills to remain relatively flat in the coming year."

The lawmakers noted their own "cursory review of LIPA assumptions over the past few years has found serious deviations from the actual results," and pointed to "major flaws" in LIPA’s forecasts in seeking a rate hike in 2015. DPS ultimately recommended an $80 million reduction in LIPA’s rate request that year. A full rate review has not been conducted since then.

The lawmakers concluded that a "thorough review of the accuracy of LIPA’s ‘estimation’ regarding the new [rate] proposal is needed to ensure that similar gimmicks and tricks are not being employed this time around."

They requested copies of any documents that would show DPS-Long Island conducted its own review of the revenue increase.

If one wasn’t done, the lawmakers urged the department to undertake it "expeditiously," and concluded, "If no review of the claims made by LIPA/PSEG is undertaken, we believe the ratepayers deserve a full explanation of such a failure to provide the accountability and transparency they were promised in 2013."

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

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