The Long Island Power Authority, faced with coronavirus-impacted revenue declines and a growing surplus of power, plans to retire at least one large steam generating unit and will make a decision on which ones by year's end, officials said Monday.
The decision to wind down a portion of the National Grid-owned fleet of old steam generators marks a major turn for LIPA as the state prepares for a carbon-free grid in coming decades and as LIPA seeks to renegotiate the tens of millions of dollars it pays in property taxes for the sites.
LIPA chief executive Tom Falcone said the first retirement of 400 megawatts to 600 megawatts of generating capacity — the equivalent of one or two big steam-generating units — would be followed by additional retirements after 2024, when the first big offshore wind turbines are slated to be operating off the Long Island and Massachusetts coasts.
“These plants aren’t here forever and we are trying to bring them [the tax cases] to some sort of fruition and give these communities some time to adjust,” said Falcone, referring to settlement offers that include gradually reducing taxes over seven years, with extensions.
Each of Long Island’s three large functioning steam-based power stations owned by National Grid consist of multiple generating units or plants, as well as some smaller so-called peaking units for high-demand summer use. The Northport power station, for example, has four larger steam-based units.
With the recent conclusion of a state-mandated study of the Northport station, LIPA found it’s both unnecessary and unfeasible to overhaul the 60-year-old facility, whose four units are each capable of producing 350 megawatts. Combined they can produce enough to power hundreds of thousands of homes.
With projections that the plant will be used even less over the next 10 years — just 2.9% of the time by 2030 — LIPA’s study found that the most cost-effective move would be to retire one of those four units, according to the study and discussions with LIPA officials. Retirement of one unit would save ratepayers $303 million over 20 years compared with a cost of up to $1.7 billion to overhaul the entire plant, the study said.
The study and LIPA’s conclusions come as the authority’s efforts to negotiate lower taxes for three power stations across Long Island have largely stalled. LIPA and the Town of Huntington had been in talks to reduce the $84 million LIPA pays in taxes for the National Grid-owned Northport power station until the pandemic hit and the town asked for a two-year delay on a settlement given the financial fallout. LIPA has declined.
Huntington Town attorney Nicholas Ciappetta declined to comment.
It’s not just the Northport plant that could see a partial retirement, officials said. With the need to decrease local capacity by 400 to 600 megawatts by 2022, the authority could also make a decision to retire generators at the E.F. Barrett plant in Island Park and Port Jefferson.
The authority also broached the possibility of retiring two more smaller generators at Glenwood Landing, where it has already decided to retire a smaller unit by year’s end. If the additional two are retired, the authority could conceivably pay no taxes at all for the property, which is the subject of a stalled tax negotiation by the Nassau County Legislature after County Executive Laura Curran reached an agreement with LIPA to settle.
The moves come as LIPA comes to grips with some hard numbers tied to the COVID-19 pandemic.
It already has decided to forgo a planned rate-case filing that would have begun next year, with increases potentially slated for 2022. Now, Falcone said, the authority will move to keep bills generally stable through the next two years, as the economy, and LIPA customers, come to grips with the impact of the economic slowdown.
In just the past three months, LIPA has seen revenue decline from 4% to 7%, a precursor to what it expects to be a tough economy over at least the next two years. For 2020 alone, LIPA expects impacts in the tens of millions: $5 million to $9 million for suspending late payment fees, $12 million to $20 million in write offs for unpaid bills; $5 million to $10 million in costs related to COVID-19 mitigation, and lower income from investments of $5 million to $6 million, according to LIPA documents.
LIPA for 2021 and 2022 plans to cut $60 million from its capital budget and defer $150 million in new initiatives, cut $10 million in operations and maintenance spending and $80 million in new O & M initiatives, and refinance up to $1.2 billion of existing debt for upward of $70 million in debt-payment savings.