LIPA files complaint over 50% price increase for use of undersea power cable

The owners of one of the most critical and heavily used undersea power lines to Long Island plan to hike its wholesale prices to LIPA by a cumulative 50% in the next three years starting in 2027, the authority said in a recent federal complaint, a hike that will hit ratepayers with potentially hundreds of millions of dollars in new costs.

In the complaint filed in late July, LIPA is arguing the new costs were the result of a contract extension it had little choice but to accept because a related contract was expiring and owners of the Neptune cable wielded “monopoly” leverage over LIPA to “impose rates unmoored from costs and unrestrained by competition.”

LIPA declined to confirm the specific cost of the contract extension, but state filings said it would be $350 million. The figure, based on contract data from the state comptroller's office, doesn't include the cost of energy LIPA purchases from power plants on the New Jersey side of the cable.

While LIPA isn’t saying how much the new Neptune rates will impact its 1.2 million customers next year, every $44 million of new cost has the potential to hike bills around 1%, Newsday has reported. If the cost is $350 million, that could mean a potential bill increase at 8% over three years. For average LIPA bills of about $200 a month, an 8% rate hike would amount to $16 more.

LIPA has bought power over the Neptune Regional Transmission System cable line since 2007, and the 65-mile power line between Long Island and New Jersey now provides more than a quarter of LIPA's energy needs. Neptune had been in the planning stages since 2001, and approved by the Federal Energy Regulatory Commission, to which LIPA has filed its complaint. 

“What started back in 2001 as a fair, competitive transmission deal, has, over time, evolved into exactly the kind of unchecked monopoly pricing that the Federal Power Act’s just and reasonable standard was designed to stop,” LIPA wrote in its complaint. “Neptune is now proposing to use its negotiated rate authority to impose an approximate 50% increase above existing rates through 2030." 

LIPA charged the new rates would “seriously harm the public interest, imposing on LIPA’s customers rates that are hundreds of millions in excess of the cost-based rate” that would apply if FERC were to alter their status in LIPA's favor.

In the filing, LIPA said it was under pressure to agree to the new cost structure "under the assumption that it would be able to replace these much-increased rates with just and reasonable rates after good-faith negotiations with Neptune of a longer-term extension," according to the filing. But when LIPA returned to the negotiating table in mid-July, talks ended "in an impasse." Neptune agreed LIPA could file with FERC to dispute the charges.  

One ratepayer advocate worried about the potential impact on 2027 rates and beyond. 

“It’s mind-blowing,” said Fred Harrison, a member of advocacy group Food & Water Watch and a Merrick ratepayer, of the potential hike to consumers. “It’s a classic illustration of why overall rates are so high, and how profit-making companies are about making as much money as possible” as ratepayers struggle to keep up.

LIPA in its complaint, argues Neptune’s authority to use “negotiated rates” as the accepted structure to get more money from LIPA is no longer justified, and that Neptune must be forced to use rates based on actual costs.

“LIPA is a captive customer of Neptune and Neptune can no longer meet the requirements for negotiated-rate authority,” LIPA charged.

Ed Stern, a principal for PowerBridge, which developed and operates Neptune, declined to comment on the filing, writing in an email: “I would be happy to comment about these wild assertions at the right time. Right now is not that time.”

LIPA, in a statement, said it is requesting that Neptune rates are based on “an appropriate cost-based framework that is fair to both electric customers and suppliers while ensuring reliable service.”

Neptune hasn’t yet responded to the LIPA’s complaint, but LIPA’s board in December authorized the authority to enter into negotiations with Neptune after the cable operator said it had identified “significant upgrades that will be needed to maintain reliable import capability in the long run.” Neptune at the time was seeking a long-term transmission service arrangement to “support financing the capital investments required to upgrade the facility after 20 years in service.”

LIPA has had a contract for use of the Neptune cable since 2007, when the 65-mile cable between New Jersey and Long Island was completed amid considerable fanfare. LIPA and Neptune at the time touted the cable's ability to supply enough energy to power 600,000 homes.

That 20-year contract was originally valued at $1.75 billion, charges paid by LIPA ratepayers for the exclusive lease to use the cable. Under the contact extension, it's now valued at $2.1 billion through 2030, according to the state comptroller. 

In 2025 alone, LIPA paid $94.2 million for use of the line, according to LIPA documents.

About 27% of LIPA’s energy comes through the cable, as well as representing 13% of the capacity LIPA must have to meet strict state generation requirements.

Neptune is so critical that its loss would be a problem, even if the planned Propel NY Energy cable were to come online as scheduled in 2030, according to the filings.

Loss of the Neptune cable “would severely compromise transmission security and reliability for LIPA and its customers because there were no viable alternatives,” LIPA wrote in its complaint, acknowledging it “lacks adequate alternatives to replace the capacity imported over the Neptune cable in the near term (next seven or more years).”

In an affidavit filed as part of the case, Lucyna Khazanovich, senior director of strategy and planning for PSEG Long Island, testified that loss of Neptune’s import capability would, “in my professional judgment, potentially expose Long Island to significant reliability violations and capacity shortfalls …”

Lawrence Kelly, a Bayport attorney who has tangled with LIPA on cable and power plant issues in the past, pointed to language in the complaint that noted LIPA’s prior expectation of having about  2,400 megawatts of offshore wind power by the early 2030s as a further complicating factor.

After the Trump administration shut down of new wind-power permits, LIPA expects just 924 megawatts of new wind power by that time. Loss of those projects and others are “part of a broader trend of related risk factors that continue to shape near- and long-term reliability conditions in downstate New York,” LIPA’s complaint states.

Kelly said it's a moment to "recognize the clean-energy bubble has burst and you need the cables that cross into Long Island” to keep the lights on. “Ratepayers are coming to terms with energy reality and there’s no way out of this for the next 20 years other than bringing gas and other technologies” onto Long Island.

LIPA and its contractor National Grid are contemplating an all-of-the-above strategy for the future, eyeing repowering and/or replacing existing power plans in the next five to 10 years.

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

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