LIPA Proposes 2006 Operating Budget and Capital Budgets for '06 & '07 Fuel Price Adjustment to be Reduced by 1% Fuel and Purchased Power Costs Projected to Exceed $2 Billion for First Time Public Comment Session Set for November 29th Uniondale, NY- November 21, 2005 - The Long Island Power Authority (LIPA) today released its proposed 2006 Operating and 2006 and 2007 Capital budgets. While the operating budget projects that LIPA's fuel and purchased power costs will exceed $2 billion for the first time next year, the Authority will reduce its fuel price adjustment by 1%, which will save the average residential customer about $1 per month, or $12 per year. The reduction will become effective New Year's Day. "We worked hard to reduce overall expenditures so we can provide some relief now for our customers as Long Island heads into the height of the heating season," said LIPA Chairman Richard M. Kessel. "We will review our fuel costs again early next year. If we can reduce our bills further due to reductions in oil and natural gas prices, we will. "Fuel and purchased power costs went through the roof in 2005," said Mr. Kessel. "As a result, out of a proposed budget of about $3.7 billion for 2006, $2.086 billion, nearly 56% of our budget, will be spent to acquire the fuel needed to produce electricity for our customers, or to buy power from both on- and off-island sources to supply to our customers. "We're hopeful that oil and natural gas costs will abate and stabilize in the months ahead so we can reduce the existing fuel price adjustment even more," said Mr. Kessel. "But, only time will tell." In addition to reducing expenditures as much as possible while maintaining reliable service and an adequate supply of electricity, LIPA has also implemented an aggressive fuel cost hedging program to help mitigate some of the impacts of higher fuel oil and natural gas prices. LIPA's 2006 projected fuel and purchased power costs are about $250 million lower as a result of projected gains on fuel hedges. Through the end of 2005, LIPA's fuel hedging program has already saved some $300 million since its inception in 2002. Additionally, over time LIPA has absorbed a portion of its fuel and purchased power costs that are above those costs contained in base electric rates. In the proposed budget, LIPA will continue to collect only that portion of its excess fuel and purchased power costs necessary to reach its financial targets. Most major electric utilities pass For the third consecutive year, the proposed Operating Budget contains a five-year financial plan. BUDGET HIGHLIGHTS LIPA's 2006 Operating Budget projects revenues of approximately $3.7 billion, which is an increase of about 14%, over the projected level for 2005. Electricity sales for 2006 are projected to be 19,919,995 Megawatt Hours (MWh), or .8% above 2005's projected sales, as normalized for the effects of weather. The budget projects that the Authority will end the 2006 fiscal year with net revenues in excess of expenses of approximately $75 million. LIPA's current net income target of $20 million is being increased to $75 million beginning in 2006 to prevent fuel price volatility and protect LIPA customers from late-year bill increases. LIPA forecasts that it will spend approximately $2.086 billion for fuel and purchased power in 2006, which is an increase of 19%, over the 2005 projected expense level. Fuel and purchased power costs have risen as a percentage of LIPA's operating expense from 31% in 1999 to 56% for the projected 2006 budget. Over the last seven years, fuel and purchased power costs have increased a staggering 184%, from $719.3 million in 1999 to over $2.086 billion for next year. LIPA's proposed Capital Budget for 2006 allocates $276 million for electric transmission and distribution system improvements as well as other capital needs, which is a slight decrease of $1.4 million when compared with the expenditure level approved for 2005. The projected Capital Budget for 2007 is $276.6 million, an increase of $.7 million over the 2006 proposed budget. Since acquiring the Island's Transmission & Distribution system in May of 1998, LIPA has spent over $1.5 billion to upgrade Long Island's electric grid to improve reliability and increase its ability to deliver an ever increasing amount of electricity annually. LIPA's reliability is first in the state LIPA proposes to spend approximately $47.8 million on energy conservation and alternative technologies in 2006, under its Clean Energy Initiative (CEI) programs, which is about $3 million over the approved 2005 budget. For the third year, LIPA's proposed budget also includes projected revenues and expenses going forward four years to the year 2010. LIPA anticipates its expenses will be: $3.7 billion for 2007; $3.8 billion for 2008; $3.7 billion for 2009; and $3.6 billion for 2010. These are expense projections that could change over time due to changes in sales "The proposed budget for 2006 will allow LIPA to reduce electric bills slightly while continuing to deliver an adequate and reliable supply of electricity to our customers," said Mr. Kessel. "Sufficient funding is also provided to meet LIPA's overall PILOT [Payments In-Lieu-Of Taxes] obligations to local governments and school districts, maintain our aggressive energy conservation and efficiency initiatives, and further enhance electric system reliability." LIPA's proposed 2006 Operating and Capital budgets for 2007 and 2008 are available on LIPA's Web site at www.lipower.org. A public comment session on LIPA's Operating and Capital budgets will be held November 29, starting at 8PM, at the Huntington Hilton Hotel on Route 110 in Melville. Comments on the budgets may also be submitted by e-mail via LIPA's Web site. It is anticipated that the LIPA Board of Trustees will consider the adoption of the proposed budgets at its December 16th meeting, which will be held in Uniondale starting at 11AM. LIPA, a non-profit municipal electric utility, owns the retail electric business on Long Island and provides electric service to nearly 1.1 million customers in Nassau and Suffolk counties, and the Rockaway Peninsula in Queens. LIPA does not own any electric generation assets on Long Island and it does not provide natural gas service. Read the full release at ### Contact Information: Press Release 11/21/05 12:01 PM Eastern |
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