LI firms fault state's ReCharge energy program
Pointing to higher-than-expected rates, an unexpected surcharge and a lack of predictability, the businesses have written officials to plead for relief, branding the state program -- which allocates low-cost power to qualified companies -- a failure.
Diamond Kongoletos, president of Holbrook-based County Energy Services, a consulting firm to the 15 Long Island companies in ReCharge New York, said the unexpected price hikes in the first three months of the year are having "a dramatic impact" on business.
"Companies that have committed to capital investments" based on expected savings "are rethinking the program. They're saying it's not what it was made out to be," he said.
Richard Wenner, president of Wenner Bread of Bayport, said his extra costs are significant.
"It looks like the total additional and unanticipated costs will total approximately $250,000," he said. "This does not take into consideration the reduced allotment of NYPA power we received this past year."
Just over 100 LI companies had an added $4 million in costs in the first quarter alone as a result of the issue.
In an April 5 letter to officials at the New York State Power Authority, which administers the program, Michael Petrucelli, chief financial officer for Uncle Wally's Co., a cookie company in Shirley, said higher-than-expected costs were impairing the program.
"The goal of the new [ReCharge New York] seven-year program was to provide low-cost, predictable power so that businesses could commit to retain jobs, invest in expansion and compete more effectively," he wrote. "We are greatly disappointed that the program has fallen short, not only for us but for all Long Island businesses. The all-in rates charges for January and February are between 18 to 20 cents per kilowatt hour," more than double the expected rate.
In an email response to Newsday questions, a NYPA spokesman said the increased costs were temporary, and that the program since its inception has saved businesses money.
Spokesman Michael Saltzman said half of the power available from ReCharge New York comes from upstate hydro generation, the price of which remains consistently low. The other half, however, is power from the marketplace, "which saw an increase in prices during January and February as the weather got colder."
While the trend generally has been down since the early months, it's not likely to be predictable. "The price of the market power is variable and goes up or down depending on fuel prices and other dynamic market conditions that are difficult to predict," he said.
Saltzman said that overall, Uncle Wally's and other recipients of ReCharge power saw savings since the program launched last summer.
For example, NYPA said Uncle Wally's saved more than $100,000 from July 2012 through February 2013 on its electricity bills, paying an average of 12 cents a kilowatt-hour versus nearly 17 cents for typical LIPA customers.
That's little comfort to Petrucelli. "They say we're saving money from full-boat LIPA rates," he said. But several months of unexpected $22,000 charges from the New York Independent System Operator have made costs prohibitive and difficult to keep to a budget. The New York ISO is the not-for-profit regulator of the statewide marketplace for power. "We're talking big numbers here."
Saltzman said the ISO charges were based on fuel price fluctuations. "All energy providers that supply electricity in New York from market sources have cost-adjustment mechanisms and experienced the same upward pricing pressure this winter. This was not unique to the RNY program," he said.
Another problem is that a discount from LIPA would not apply to energy purchased from entities other than NYPA and its hydroelectric power at steep discounts. "LIPA has advised that it cannot provide discounted delivery rates for the market portion of RNY allocations, if that portion is provided through sources other than NYPA," Saltzman said. Petrucelli said Uncle Wally's, which had once considered moving out of state because of mounting energy costs, is "once again at a crossroads."
Any spike in market prices for energy, he said, could again leave businesses scrambling. "Going forward, we don't know what's going to happen in the summer," he said. "Unless we change the allocation method to what it was in the past, Long Island will always be penalized."