LIPA touts millions in savings, but customer bills are still rising

LIPA says it is on course to save hundreds of millions of dollars or more as power plant tax challenges, a recent victory on wind power grid costs, debt refinancing and even a good bet on 2022 fuel hedging begin to pay off. But don’t expect lower monthly electric bills anytime soon.

In a series of presentations at a board of trustees meeting last week, Long Island Power Authority officials touted upcoming debt offerings they said could save customers $350 million, depending on future interest rates. They pointed to $554 million in anticipated savings after the settlement of power plant tax challenges across Long Island.

They noted that the state Public Service Commission’s recent decision to spread the cost of upgrading the state grid for wind farm power also could save hundreds of millions or more from an original PSC decision that put the bulk of costs on Long Islanders. And they noted that even as natural gas prices spike, a PSEG fuel-hedging program would save ratepayers more than $300 million this year.

However, much of the savings LIPA foresees will take years to amass to materially impact ratepayer bills and, in the near term, have been swallowed up by increases in the cost of natural gas.

LIPA officials during the same board meeting noted that rates have been steadily climbing.

The all-in rate for average customers, a figure that includes the total bill cost divided by total usage, reached an average 25 cents a kilowatt-hour in March and May, LIPA said. For those using 750 kilowatt-hours, it amounts to a monthly bill of around $187.50. The average all-in residential rate for all of 2021 was 22.1 cents, or $165.75 per month, according to LIPA figures.

The presentation noted that LIPA rates have jumped 37% since 1997, a figure the authority noted is lower than its regional counterparts Con Edison (up 83% in that time) and PSE&G of New Jersey (up 51%).

This month PSEG Long Island, which runs the grid under contract to LIPA, included a flyer in customer bills titled “responding to higher energy prices.” 

"We expect electricity prices to remain higher than usual throughout 2022, which is mostly due to higher natural gas prices," it says on a blog for customers that also advises, "Reducing the amount of energy you use is the most effective way to save." 

Customers such as Richard Siegelman of Plainview have taken note. His recent May all-in electric bill has jumped to 27.4 cents a kilowatt-hour, or $155.34, after his March/April bill hit 26.2 cents, or $169.96, because of higher usage.

Rising natural gas prices are the culprit this year, and remain a somewhat unpredictable factor in future rates, PSEG said. But it could have been worse. PSEG's fuel-hedging program, on course to save $300 million this year if prices remain as high as they are now, was originally expected to save around half that amount.

In a separate analysis for its 2022 budget, LIPA officials noted 11 separate initiatives, including cutting power-plant expenses and capping its local tax payments at 2%, would save customers $999 million this year alone. That figure, LIPA said in response to Newsday questions, equates to a savings of around $44 a month for average customers “dependent on the power supply charge.”

But this year's power supply charge has risen steadily, well above 2021 predictions, hitting 12.8866 cents a kilowatt-hour in May, compared with just over 11 cents for May of last year, a 16% jump.

In the end, the larger savings, which will come over years, may wind up moderating increases rather than leading to lower bills. For instance, the $554 million to be saved through lower power plant taxes will come over the next five years, with the bulk of the savings coming at year five, as taxes paid to local municipalities gradually wind down.

The current taxes paid for those plants, amounting to $179 million a year, will be reduced to around $94 million by the end of 2027, LIPA officials said.

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

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