Long Island Power Authority Proposes 2009 Budget

Uniondale, NY - The Long Island Power Authority (LIPA) has released its proposed 2009 budget which continues its leadership role in promoting energy efficiency and renewable energy.  LIPA is also adjusting the Power Supply charge to recover its fuel and purchased power costs resulting in a 4.8% increase to the typical residential customer’s monthly bill; about $7.45 per month.

“LIPA works diligently every day to minimize or mitigate impacts to customer’s bills by operating in as lean a fashion as possible without impacting the reliability of our service and while continuing to invest in its energy future by enhancing our commitment to energy efficiency initiatives and in renewable forms of energy,” said LIPA President and CEO Kevin S. Law.

Continuing the push to position itself as a leader among the nation’s public utilities in the areas of energy efficiency and clean alternative forms of energy and to begin the process of weaning ourselves from our over-reliance on Mideast oil, the Authority is increasing its proposed spending in those areas by $13 million over 2008 levels. LIPA plans to expand upon its successful Solar Pioneer program and create a new Solar Entrepreneur program for commercial customers interested in installing photovoltaic systems at their businesses.  LIPA has also proposed funding to develop a small wind power initiative for residents and businesses and will begin to implement its Efficiency Long Island program announced earlier this year, but will defer creation of a separate assessment to pay for the program until 2010.

“We need to become smarter about the energy we use,” said Law. “While rates are largely beyond our control as most expenses are statutory, legal, financial and contractual fixed costs, we can help our customers lower their bills while promoting green collar jobs for Long Island’s beleaguered economy.”

Despite recent declines in fuel and purchased power prices, LIPA projects its fuel and purchased power costs to increase $187 million over the level budgeted in 2008.

To meet these new and increasing costs, LIPA requires an adjustment in the Power Supply Charge effective January 1, 2009 resulting in a 4.8% increase to the typical residential customer’s monthly bill, which will mean approximately $7.45 more per month.

“The unfortunate truth is that generating and delivering electricity to customers is becoming an ever-increasingly expensive enterprise in the 21st Century.  “Volatile commodity prices, swelling property taxes, steep increases in interest expenses and new environmental regulatory fees assessed on generation operators, (all mandatory costs), put pressure on LIPA’s operations,” said Law.

Navigating the pitfalls created by a global economic crisis and a rollercoaster fuel market has proved to be a significant challenge.

Major Factors Driving the Power Supply Charge Adjustment

* $114 million gap from the use of power supply revenues over-collected in 2007 and used in 2008, mitigated to some extent by the utilization of KeySpan/National Grid settlement benefits to offset this cost increase (there was no over collection in 2008 to transfer to the 2009 budget)
* $41 million in higher commodity costs net of the impact of LIPA’s commodity hedge positions for 2009
* $37 million in compliance costs associated with the Regional Greenhouse Gas Initiative (RGGI)
* $27 million for LIPA’s compliance with the State’s Renewable Portfolio Standard (RPS)
* $19 million in higher bill credits to ESCO’s due to higher participation in the Long Island Choice Program

Further Pressures Impacting LIPA’s 2009 Budget
* $24 million more in interest expense
* $16 million more in PILOTS and revenue taxes, including property taxes passed through on National Grid generation plants

Though LIPA is a non-profit instrumentality of the State of New York, it receives no revenue or financial assistance from the state or federal governments and LIPA pays more than $425 million in taxes to the state, Nassau and Suffolk counties, towns and villages and local school districts on Long Island; and all of LIPA’s costs must be recovered from its customer base.

“In this unprecedented economy with major industries and financial institutions failing, the results are creating a rippling effect across the country and LIPA is not immune from those consequences. The credit crisis has created additional challenges for us and has forced us to convert some variable rate debt into fixed rate debt which has led to higher interest payments in 2009.” Law added. “Despite these financial challenges, we need to continue to plan for Long Island’s energy future.”

Proposed Budget Highlights

* Utilization of $10 million in KeySpan/National Grid settlement benefits to fund a newly-created Low-income Senior Energy Assistance Program
* $16 million in funding for renewable technologies including expansion of solar programs and creation of new wind power initiative for residential and commercial customers
* $40 million investment for LIPA’s new energy efficiency program (Efficiency Long Island)
* Funding for implementation of 50 MW solar project (largest solar initiative in the State of New York)
* Additional funds to expand Smart Meter pilot initiative
* Funding for consultant to study redevelopment options for the nearly 60 acres of industrially-zoned land owned by LIPA surrounding and including the former Shoreham Nuclear Power Plant
* Includes funding to finalize update to LIPA’s Master Energy Plan
* Funding included for an independent audit of LIPA’s Power Supply Charge
* Funding for the opening of the first LIPA customer service center in the Rockaway portion of Queens

Law stressed that continuing investments in renewable forms of energy and efficiency is essential as dwindling natural fossil fuels and the volatility of pricing for the remaining quantities require that we develop viable alternatives now.

LIPA’s proposed 2009 Budget is available on LIPA’s Web site at www.lipower.org.

Public comment sessions on the Budget will be held on December 4th at 10:00 a.m. and 7:00 p.m. at the Melville Marriott located at 1350 Old Walt Whitman Road in Melville. Comments on the budget may also be submitted by e-mail via LIPA’s Web site and will be accepted through December 9th.  Public input and participation is strongly encouraged.

It is anticipated that the LIPA Board of Trustees will consider the adoption of the proposed budget at its December 11th, 2008 meeting, which is also open to the public and will be held at LIPA’s headquarters at 333 Earle Ovington Boulevard in Uniondale beginning 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