LIPA power costs rise nearly $300M over budget through Feb., driving higher bills

Power supply costs for the Long Island Power Authority soared $294 million more than projected through the end of February, driving customer bill hikes of up to 20% this year, while an expert Wednesday indicated fuel pricing trends could keep costs high through 2027.

Those factors, tied chiefly to freezing winter weather and the Middle East conflict, are throwing cold water on LIPA’s projection for lower bills in 2026, though an official said the prospect was still possible. The utility noted that the higher costs in January and February, recouped over time, "will result in customers experiencing higher rates for the upcoming months."

The news isn’t unique to LIPA. Utilities across the country, and notably those in the Northeast, have seen customer bills spike with record cold weather, constrained gas supplies and, more recently, the war in the Middle East.

LIPA, in setting its 2026 budget last year, projected power supply costs would decrease this year, along with customer usage, and result in bill reductions of upward of $6 a month. At the same time, the utility hiked separate delivery charges on bills by $3.12 a month for average customers, an increase it had projected would be offset by lower power supply charges. 

But as Newsday has reported, power supply charges have increased for each month of 2026 starting in January.

In a statement to Newsday on Wednesday, LIPA and PSEG Long Island, which operates the grid for LIPA under a five-year, $493 million contract, said customer bills have increased between 15% and 20% thus far this year, "driven by many factors including commodity prices and weather."

Through the end of February, LIPA has spent more than $606 million for power supply costs, which include buying power and fuels to keep plants running, chiefly natural gas and fuel oil. LIPA last year budgeted $312.9 million for power supply costs by that period — leading to an overbudget figure of $294 million. Power supply costs are a direct pass through to customers and fluctuate month to month on customer bills. 

One ratepayer had little doubt about what the market trends mean for PSEG bills. "We know what we’re in for here, don’t we?" said Merrick customer Fred Harrison, a champion for green energy at the advocacy group Food & Water Watch, referring to higher bills. 

In their joint statement, LIPA and PSEG said they were "committed to delivering reliable power while keeping rates affordable to customers. We have taken action to do so, including keeping both of our operating budgets flat from 2025 to 2026." 

During a LIPA board meeting Wednesday, Josh West, chief commercial officer for LIPA’s fuel-purchasing contractor, The Energy Authority, displayed a chart that plotted future wholesale natural gas prices trending upward through January 2027.

It’s not just the cold weather and the Middle East conflict driving higher prices, West said.

"We’re seeing large data center demand growth and that’s also increasing the demand for natural gas," West said. "That could put upward pressure on natural gas prices this summer as well."

There’s also the fact that while U.S. natural gas production is at record highs, the country is also exporting more to other nations. And U.S. gas storage capacity hasn’t been increasing to keep up with higher production.

The good news: LIPA has a hedging program in place that has helped to alleviate price spikes. Around two-thirds of LIPA’s power supply costs are covered under the hedging program, official said.

West also noted that an end to the Middle East conflict would have a quick impact on fuel costs. Crude oil and natural gas prices "would come down pretty quickly," he said.

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

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