LONG ISLAND POWER AUTHORITY

LIPA Files Petitions with State Public Service Commission
Voluntarily Requesting Review of its Fuel Surcharges

Uniondale, NY - May 3, 2006 - The Long Island Power Authority (LIPA) today announced that it has voluntarily filed with New York State's Public Service Commission (PSC) two petitions seeking PSC review of LIPA's fuel surcharge including the appropriateness of its charges to customers and seeking a confirmation that LIPA is treating fuel and purchased power costs properly and similar to other New York electric companies.

LIPA said that it was taking this action because the PSC is recognized for its expertise in this area, and its independent review of LIPA's procedures would assure Long Island's electric consumers that the
Authority has acted appropriately and in the best interest of its customers.

LIPA Chairman Richard M. Kessel said that LIPA's analysis concludes that the Authority has permanently absorbed fuel and purchased power costs of approximately $900 million - costs normally passed on to customers.

LIPA's first petition seeks a declaratory ruling regarding the PSC's interpretation of its rule on escalation clauses, that the PSC allows utilities to automatically recover increased fuel and purchased power and other costs through escalation clauses. Specifically, the petition asks the Commission to address the cost categories that the PSC allows utilities to recover through escalation clauses or other Commission rules. LIPA maintains that the Commission allows utilities in New York State to recover through escalation clauses a range of costs beyond fuel costs, as LIPA does currently through its fuel and purchased power cost adjustment.

The second LIPA petition asks the Commission to confirm the appropriateness of the actual costs that LIPA recovers through its fuel and purchased power cost adjustment clause. LIPA is asking the PSC to fully review these costs and determine whether LIPA is charging its customers appropriately for fuel and purchased power.

Figures submitted by LIPA with its petitions to the PSC, show that the Authority's fuel and purchased power costs increased 244% from $713 million in 1999 to more than $1.74 billion in 2005 before accounting
deferrals and credits. Of that increase, 65%, or $664 million resulted solely from higher oil and natural gas prices; $376 million resulted from higher purchased power costs driven by higher commodity prices, and
increased demand for electricity by LIPA customers.

Additionally, the data submitted by LIPA to the PSC shows that LIPA's Fuel Hedging Program saved almost $300 million in fuel costs over a four-year period from 2002 through 2005, and that LIPA has permanently
absorbed almost $900 million in recoverable fuel and purchased power costs since 1999. Without the successful Fuel Hedging Program and LIPA's ability to absorb a significant sum of recoverable costs, customer bills would be much higher than they are now. LIPA indicated that electric rates in 2005 alone would have been 7.4% higher had the Authority not absorbed $180 in '05 fuel costs.

"As the cost of the fuels needed to produce electricity rose to record levels in recent years, LIPA has done an extraordinary job of holding down the ultimate cost of the electricity it delivers to its customers,"
said LIPA Chairman Richard M. Kessel. "While I know bills are high, all of the increases are related to skyrocketing oil and natural gas prices over which we have no control. In fact, bills in 2005 would have been
7.4% higher if we hadn't absorbed almost $180 million in higher fuel costs in that year alone.

"It's easy to forget that a barrel of oil cost about $15 when LIPA cut electric rates by an average of 20% in May of 1998," said Mr. Kessel. "It's also easy to forget that a gallon of regular gas cost only $1.18 back then.

"The post-9/11, post-Katrina world is totally different," Mr. Kessel said. "The cost of a barrel of oil has risen to heights unimagined even just two or three years ago. In 2003, no one predicted that oil would go
past $75 per barrel or that gasoline would cost more than $3 per gallon at the pump. And right now, no one is able to predict where it will stop.

"In confronting those unprecedented cost pressures, and to protect our customers from the full impact of increased costs, LIPA took prudent and reasonable actions over the years to limit the impact of the rising
costs of fuel and purchased power on our customers as much as possible," said Mr. Kessel.

According to Mr. Kessel, the petitions filed with the PSC request that the fuel cost escalation clause adopted by LIPA over the years, in an open and public process, be fully reviewed and that they are deemed to
be appropriate and justifiable.

"It is our hope that the PSC will accept our petitions and address our request as quickly as possible so LIPA's customers can be confident that the Authority is following a process that is similar to those used by
other utilities in New York State," said Mr. Kessel.

LIPA, a non-profit municipal electric utility, owns the retail electric Transmission and Distribution System on Long Island and provides electric service to over 1.1 million customers in Nassau and Suffolk counties and the Rockaway Peninsula in Queens. In terms of customers served, LIPA is the 3rd largest municipal electric utility in the nation and the 6th largest in terms of electricity delivered. LIPA does not provide natural gas service or own any on-island electric generating assets.

###

LIPA Contact Information:
Media Relations: (516) 719-9892
Media Pager: (516) 525-LIPA
media.relations@lipower.org

News Center
http://www.lipower.org/newscenter

Press Release 5/04/06 11:23 AM Eastern

Press Release Home