Long Island Power Authority (LIPA) Proposes 2008 Operating Budget

* Millions of Dollars Cut from Last Year’s Budget
* Fuel & Purchased Power Supply Costs Projected To Reach $2.1 Billion as Oil Approaches $100 per Barrel

Uniondale, NY- November 20, 2007-The Long Island Power Authority (LIPA) today released its proposed 2008 Operating Budget anticipating revenues of $3.7 billion. The cost of the fuels used to generate electricity and the electricity that LIPA buys from suppliers, remain its largest single expenditure totaling 55% of the entire operating budget - and are projected to increase by 10% next year to more than $2 billion. Fuel and
purchased power costs have risen as a percentage of LIPA’s operating expense from 31% in 1999 to 55% for the proposed 2008 budget.

Despite the dramatic increases anticipated in the cost of fuel and purchased power, LIPA officials have employed a “smart management” approach in its budgeting practice in an effort to reduce operating expenditures for 2008 to help mitigate the impacts of the sharp increases in the Authority’s non-discretionary costs.

The net result is a modest increase in the Power Supply Charge back to the rate that was in effect at the beginning of 2007, which will add 2% or approximately $3 to the typical residential customer’s monthly bill - less than the current price of one gallon of gasoline or home heating oil.

“This is an extremely tight budget,” said LIPA’s President and CEO Kevin S. Law.  “We cut back in a number of ways, both large and small, to minimize the need to increase the Power Supply Charge despite the historic increases that are projected for the cost of fuel needed to produce electricity for LIPA’s customers.”

Mr. Law noted that 55% of LIPA’s budget goes for oil, gas and purchased power costs.  Another 17% is spent to cover operating and maintenance costs; 16% for debt related costs; 11% on taxes and Payments in Lieu of Taxes (PILOTS), and, contrary to public perception, less than 1% for salaries and benefits for LIPA’s employees and its professional services and general expenses.

With more than 95% of the Authority’s nearly $4 billion budget comprised of non-discretionary expenses, Law applied the scalpel to the discretionary portion of its spending plan and as a result, cut more than $8 million in spending.

Innovations and smart management initiatives proposed by Law include:

* Cut over $5 million in outside legal and  consulting firms
* Proposed end to incentive compensation for LIPA employees
* Abolished three upper management positions
* Eliminated outside lobbying firms formerly retained by LIPA
* Eliminated charitable contributions made by LIPA
* Reduced sponsorships, advertising, travel and conferences
* Hired new employees at lesser salaries than their predecessors’
* Cutting expenses deemed not central to LIPA’s core mission; and
* Kept overall operating expenses to 2.9% increase, which is below the change in the Consumer Price Index (CPI)

“These types of changes will not in and of themselves result in substantial rate relief to our customers,” Law said, “but they are illustrative of the fact that we are working hard to eliminate waste and to run the tightest, leanest ship we can without impacting the reliability of our service. We recognize in these times of historic fuel and energy-related prices that we must do everything we can to minimize any required increase in our customers’ bills; and I intend to treat the ratepayers’ money as if it were my own.”

Law also reminded customers that the most effective way to keep electric bills down is to conserve as much energy as possible in homes and businesses by replacing old light bulbs with new Compact Fluorescent Light bulbs and using energy efficient appliances.  (For more practical tips on energy conservation visit LIPA’s website at www.lipower.org/cei/.

OTHER OPERATING BUDGET HIGHLIGHTS PROPOSED BY LAW

* Funded $2.6 million in “Green Premium” related to LIPA’s implementation of the Renewable Portfolio Standards Program
* Proposed 11% increase in funding for LIPA Energy Efficient Programs
* Included 34% increase in funding for Photovoltaic Program (Solar Pioneer)
* Proposed 22% increase in funding to Low-income Conservation Program for income-eligible ratepayers
* Created several new key management positions while still slightly reducing LIPA’s overall workforce. Positions include:
  * Vice President of Environmental Affairs to take LIPA in a new direction ensuring a green energy future for Long Island
  * Director of Regulatory Rates to serve as point person for PSC or other regulatory agency review of LIPA rates
  * Compliance Officer to ensure that LIPA conducts its business in conformity with all applicable statutes, regulations, and agreements.

“I intend to make LIPA a leader among public utilities in protecting our environment and in pursuing energy efficiency, conservation and renewable power,” Law said.

LIPA’s proposed 2008 Operating Budget is available on LIPA’s Web site at www.lipower.org.

Public comment sessions on the Operating Budget will be held on December 4th at 10:30AM and 7:30 PM in the second floor Assembly Center at LIPA’s Office at the Omni Building in Uniondale, which is located at 333 Earle Ovington Blvd.

Comments on the budget 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 budget at its December 13, 2007 meeting, which will be held in Uniondale starting at 11AM.

LIPA, a non-profit municipal electric provider, 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. LIPA is the 2nd largest municipal electric utility in the nation in terms of electric revenues, 3rd largest in terms of customers served and the 7th largest in terms of electricity delivered. In 2006, LIPA outperformed all other overhead electric utilities in New York State in all three major reliability categories. LIPA does not provide natural gas service or own
any on-island generating assets. More information about LIPA can be found online at: http://www.lipower.org

Please visit
http://www.lipower.org/newscenter/pr/2007/112007_budget.html  for the
Proposed 2008 Budget and related material.

###

LIPA Contact Information:
Media Relations: (516) 719-9294
Media Pager: (516) 525-LIPA
media.relations@lipower.org

LIPA News Center
www.lipower.org/newscenter