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LIPA customers could see 2.3% hike in delivery charge, says 2022 budget

Powerlines in Centereach on Dec. 2, 2020.

Powerlines in Centereach on Dec. 2, 2020. Credit: Newsday/Thomas A. Ferrara

LIPA customers will see a 2.3% increase in the delivery charge portion of their bills next year, but the utility is projecting that lower usage and other factors could ultimately lead to bills that are lower than 2021's.

The $3.91 billion budget LIPA proposes for 2022 is a jump from the $3.66 billion it budgeted in 2021, but LIPA's actual costs this year ballooned well beyond that plan, to $3.98 billion.

This year's unexpectedly higher costs were tied to the loss of several undersea power cables, which forced LIPA to buy power at higher prices, as well as higher natural gas costs. Also pushing up costs this year was a $59 million bill for preparation for Tropical Storm Henri, which largely missed Long Island.

LIPA is proposing to spend an additional $14.9 million for tree trimming next year, with other increases of $6.9 million for information technology enhancements, $4 million for heat pumps for low-income customers and $2.1 million for "customer outreach and satisfaction."

PSEG Long Island, which operates the Long Island electric grid under contract to LIPA, has seen its customer satisfaction drop since its failures during Tropical Storm Isaias in 2020.

LIPA this month announced a new contract with PSEG that puts half of the New Jersey company’s $80 million annual management fee at risk if it fails to meet nearly 100 new LIPA performance targets. LIPA trustees will vote on the new budget, and the PSEG contract, in December.

LIPA bills have at least five separate charges for collecting revenue to run its operations. Some of the charges, such as the power supply charge, adjust month to month, while the delivery charge, effectively LIPA’s "rate," holds steady through the year. The power supply charge is the cost of buying energy, while the delivery charge reflects the cost to get the power to customers.

There’s also a distributed energy resources, or DER, charge, reflecting the cost of renewable programs; a delivery service adjustment, which lets LIPA recover storm, debt and other annual costs beyond the budget; and the revenue decoupling mechanism, which can result in a customer cost or refund depending on how close to its budgeted sales LIPA finishes each year.

LIPA’s 2022 budget anticipates average customer bills will amount to $169.28 a month next year, despite an increase in natural gas prices and an anticipated lowering of delivery charge costs of $1.30 per month, if customers use less energy. The renewables charge, also called the distributed energy resources, will go down 10 cents, LIPA said, and other adjustments will decline 6 cents.

Offsetting factors such as the decoupling charge and a delivery service adjustment mean that bills will be below the $172.82 a month average customers paid in 2021, LIPA said, while being relatively stable with 2020 bills of $169.42.

LIPA Chief Executive Tom Falcone said the primary driver of the anticipated lower bills next year is the expectation that customers will use less power than the increase in usage they experienced in 2021. If usage holds steady or increases, however, bills could increase.

When it drew up last year’s budget, LIPA predicted average bills this year would be $163.84 a month, or $3.78 lower than prior year’s bills, but the actual bills were nearly $10 per month higher. A rise in natural gas prices explains part of the increase, Falcone said, but the greater factor was the higher power costs tied to the faulty power cables, most of which have been repaired. A transformer tied to the Neptune Cable is expected to put that line back in full service in January, he said.

LIPA in 2021 spent more than $120 million responding to storms, including $59 million preparing for Henri, which skirted just beyond Long Island, $7 million for remnants of Tropical Storm Ida, $30 million for Tropical Storm Elsa and $18 million for a winter storm that LIPA referred to as Orlena.

For 2022, LIPA is requesting a 2022 storm budget of $74.5 million, an increase of $4.5 million from last year’s approved $70 million. It’s also proposing $28 million more in debt and related costs, $16.7 million more for contract increases, and $8.9 million more in wage increases.

Recent settlements of power plant taxes helped reduce the amount LIPA expects to pay in taxes next year to $211.8 million, a drop of $56.5 million.

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