LIPA & National Grid/KeySpan Announce Agreement on New Contracts
Significant Ratepayer, Reliability & Repowering Benefits for LIPA’s
Customers and Region
Melville, N.Y. – March 23, 2007 – The Long Island Power Authority (LIPA) today announced that an Agreement in Principle has been reached with National Grid/KeySpan on a series of contract-related issues that will
provide significant ratepayer, reliability and repowering or power plant emission reduction benefits to LIPA’s electric customers and to the Long Island region.
When combined with the significant package of benefits resulting from an earlier negotiated extension of its Management Services Agreement with KeySpan that was announced in December, 2005, the economic benefits of
both agreements are valued at approximately $236 million.Â Additionally, savings of approximately $34 million per year to be derived from lower fees paid by LIPA under the Management Services Agreement.
“We have been engaged in extensive and deliberate process that has allowed LIPA to achieve its goal of obtaining the maximum amount of economic benefit for Long Island’s electric consumers from the planned acquisition of KeySpan by National Grid,” said both LIPA Chairman Kevin Law and LIPA CEO/President Richard M. Kessel.Â “We believe the proposed agreement with National Grid/KeySpan provides a range of benefits for LIPA’s customers that will help stabilize or even reduce electric rates and charges, maintain our high level of electric system reliability, and
provide an affordable approach to repowering and/or power plant emission reductions.”
“National Grid looks forward to working with LIPA to bring the assets and expertise of a global company with the continued benefits of expert local management and a strong commitment to Long Island,” said National
Grid Chief Executive Steve Holliday.
“With its knowledge and expertise, National Grid is the best company to assist Long Island as it addresses the challenges of energy supply and efficiency in the future,” said KeySpan’s Chairman and CEO Robert Catell.Â “National Grid’s excellent record in environmental stewardship and forward-thinking positions on climate change are a timely addition to Long Island’s energy landscape.”
“IBEW Local 1049 members take great pride in building and maintaining a safe and reliable electric transmission and distribution system,” said Robert Shand, Business Manager of IBEW Local 1049.Â “We believe that to continue to maintain the high standards that we have achieved, reliability and performance metrics tied to financial incentives and disincentives are necessary.Â We commend LIPA and KeySpan/National Grid for reaching an agreement that will maintain the skilled workforce necessary to provide the first class energy delivery system Long Islanders so richly deserve.”
“This agreement shows a commitment by National Grid and LIPA to provide excellent service and reliability to the electric customers of Long Island, and to do it with an experienced and dedicated Union work force, said Donald J. Daley, Jr. Business Manager, Local 1381, IBEW.”
Highlights of Benefits to LIPA Customers
LIPA’s customers will benefit in many ways as a result of the combined elements of both the December 2005 LIPA/KeySpan Definitive Agreement and the new LIPA/KeySpan/National Grid Agreement in Principle. These benefits include:
Ratepayer Economic Benefits:Â ($236 Million)
* $120 million settlement of disputes that had arisen under the terms of the original Management Services Agreement with KeySpan;
* $34 million net present value in annual operating cost savings through 2013;
* $91 million in synergy savings taken over the remaining seven-year of the MSA term of the period;
* $7 million in incremental cash consideration to LIPA;
* National Grid will provide $12 million to fund a LIPA/National Grid joint effort to promote electric and gas efficiency programs;
* Freeze transportation rate for the delivery of natural gas to power plants on Long Island at the current level through May 2013; and
* National Grid will not initiate any property tax rate challenges on its Long Island generation assets without prior approval by LIPA.
Reliability & Service Benefits:
* National Grid will provide $6 million in funding for LIPA’s Storm Hardening Initiative;
* National Grid agrees to maintain on-island field personnel at mutually agreed upon levels to meet LIPA’s target performance metrics or suffer financial penalties;
* National Grid will maintain its customer service functions – Customer Call Center and District Offices – on Long Island;
* National Grid will integrate its Long Island storm response priorities with its other US operations which will provide LIPA with a “first call” opportunity that can quickly move upstate and out of state National Grid crews to Long Island to assist with an enhanced restoration response to severe storms and emergencies;
* National Grid will follow LIPA’s directives regarding service performance, emergency response, and capital projects;
* Eighteen performance metrics have been established that can trigger financial penalties if not met; and
* Greater information access and operational transparency provided to LIPA on a daily basis.
Repowering and/or Emission Reduction Benefits:
* LIPA obtains the option to purchase at book value the E.F. Barrett plant and Combustion Turbines and the Far Rockaway generating plant for the purpose of repowering;
* LIPA also obtains the option to purchase KeySpan’s fleet of Combustion Turbines (peaking units) at Wading River and at Shoreham for 1.25 times book value.Â This option enhances repowering opportunities at all of these locations;
* National Grid commits to begin to install $100 million in NOx emission reduction equipment and efficiency improvement equipment at Northport units and NOx reduction equipment at Port Jefferson units immediately. The level of cost recovery for these improvements will be limited to the level of fuel and emission allowance savings achieved during the term of the Power Supply Agreement;
* National Grid and LIPA will perform a detailed Northport plant and Port Jefferson plant engineering and economics repowering studies;
* National Grid will provide summer availability replacement power insurance for a minimum of 3 years; and
* LIPA gains the Right of First Refusal if National Grid proposes to sell its generation to a foreign-controlled entity.
LIPA will schedule a public information session on the new Agreement in Principle with National Grid and KeySpan.
The LIPA Board of Trustees must review the Agreement and if approved by the Board it will then be sent to the State Attorney General’s Office and the State Comptroller’s Office for review and approval.
LIPA, a non-profit municipal electric utility, owns the retail electric Transmission and Distribution System on Long Island and provides electric service to more than 1.1 million customers in Nassau and Suffolk counties and the Rockaway Peninsula in Queens.Â LIPA is the 3rd largest municipal electric utility in the nation in terms of customers served and the 6th largest in terms of electricity delivered.Â In 2006, LIPA outperformed all other overhead utilities in New York State in all three major reliability categories.Â LIPA does not provide natural gas
service or own any on-island generation assets. More information about LIPA can be found online at: www.lipower.org.
For additional information regarding this news release please visit
LIPA’s Website at http://www.lipower.org/newscenter/pr/2007/032307_grid.html
LIPA Contact Information:
Media Relations: (516) 719-9892
Media Pager: (516) 525-LIPA
LIPA News Center