LIPA 2023 budget projects a decline in monthly bills, but there's a caveat

LIPA trustees on Wednesday were presented with a proposed 2023 budget that increases revenues to $4.14 billion even as it expects lower utility bills next year because of projected declines in customer usage and the cost of natural gas.

However, past projections have shown that savings don't always materialize. Last year, LIPA projected monthly bills would be around $169.26 a month. But in the end spiking costs for natural gas led bills this year to rise 15% over its projection, with customers paying an average $25 a month more than expected.

Trustees will vote to approve the budget in December.

LIPA in budget information released Tuesday said it expects residential customer bills next year to decline to around $175.42 a month, well below the average $194.34 a month customers paid this year. That's despite a roughly $270 million increase in the budget compared with 2022's $3.85 billion budget.

The delivery charge portion of bills — the second largest component of LIPA charges — will increase 1.5% next year. That could translate to an increase of around $2.93 a month, if customers keep their usage constant with 2022. 

The projection for overall lower bills next year is based partly on LIPA’s belief that customers will use less energy in 2023 compared with this year. But customers in 2022 actually used 6.2% more electricity than LIPA planned, a fact the utility attributed to “continued work-at-home” patterns tied to COVID-19 and hotter weather this summer.

"At the end of the day, there's an art and science to this," said LIPA chief Tom Falcone of LIPA and PSEG's estimates. 

Lower expected usage next year, he noted, is based on "historic trends, growth in the economy" and "movement back to the office," which could result in lower residential use. Either way, he noted, LIPA's revenue decoupling mechanism will credit customers for any 2023 over-expenses in the following year. 

One customer said he was skeptical of the projections. 

“Those estimates and forecasts remind me a little bit of what the Yankees were saying when they were 61 and 23 this summer,” said Richard Siegelman, a Plainview ratepayer. “They’re not worth anything anymore.”

Last year, Siegelman was told to expect his bill to drop, but he’s actually had sky-high bills through the summer, including his first at more than $532 (for two months), in September. His average monthly all in-cost for electricity (the total bill divided by kilowatt-hour usage) in 2022 was 26 cents a kilowatt-hour, vs. 23.6 cents a kilowatt-hour in 2022 — a 10% increase, according to figures he sent to Newsday.

“By the time next year comes around, people will forget what LIPA projected, or excuse them on the basis of, no one really knows what’s going to happen,” Siegelman said. Either way, he said, “I feel for people who have to worry about paying their bills for electricity.”

According to Newsday calculations, LIPA's all-in cost for electricity amounted to 25.6 cents for 2022, and is projected to drop to 24.2 cents next year. 

Indeed, LIPA says that even if the average customer usage stays the same as it was for 2022, bills are still projected to decline next year, to around $183.99 a month.

That’s because natural gas prices rose so high this year that LIPA estimates they could actually fall next year. But don’t consider that projected $11.88-per-month figure to be money in the bank — LIPA has a recent history of under-projecting power supply costs, too. Last year it under-forecast 2022 power supply costs by $433 million, most of it from higher natural gas prices tied to the war in Ukraine.

Falcone noted that customers pay only the costs LIPA incurs — there are no profits or shareholders — and that any overcollections tied to missed projections in 2022 will be returned to customers through the revenue decoupling in the following year. 

Among expenses this year driving the overall budget higher, LIPA said, are $52 million in debt service payments, chiefly from rising interest rates; $25 million tied to inflation, $14 million for new initiatives to strengthen cybersecurity and reliability, and $9 million in contractual wages for PSEG workers.

LIPA also increased the storm budget by $4 million to $80 million and added another $4 million for energy efficiency and related programs.

The myriad elements of typical LIPA residential bills will see changes in 2023. The delivery service adjustment is projected to increase the monthly credit by $3.79, while the revenue decoupling mechanism will increase a customer credit by $2.72 per month.

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

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