Thiele: LIPA Proposes Biggest Increase in Power Delivery Charge in History

Fred Thiele
New York State Assemblyman Fred W. Thiele Jr.

Today, the Long Island Power Authority (LIPA) approved a $325 million, three-year rate increase for their 1.1 million customers after a contentious meeting at LIPA headquarters. The increase is in the delivery charge portion of the utility bill which represents about 50% of the total utility bill. The fuel charge represents the remainder of the bill.

Under the LIPA Reform Act, the Board claimed it could only vote on inconsistencies they found in the state-recommended rate hike. It could not hold an up or down vote on the rate hike itself. While some board members expressed displeasure, they did not put forth any specific objections, and therefore the rate hike will go through. The final process for the Board will be officially to adopt the revenues laid out in the rate increase when LIPA adopts its budget in December.

When he signed the LIPA Reform Act in the summer of 2013, Governor Andrew Cuomo stated: “You have to operate the utility better. LIPA’s answer to everything is more money. We don’t have more money. You can’t keep putting your hand in the pocket of the ratepayers. That’s not the answer. The answer is, use the money you have better.”

Unfortunately, neither PSEG-LI, DPS-LI, or LIPA heeded the advice of the Governor. LIPA increased the delivery charge only twice over the last 16 years, both times by less than 2%. This proposal is the largest increase in the delivery charge in the history of LIPA.

The proposal will also increase indebtedness which every PSEG-LI customer will be liable to repay under this rate proposal. The Long Island Power Authority plans to borrow substantially over the next four years, with an anticipated debt level of more than $8 billion by the end of 2018. LIPA debt in 2012 stood at $6.9 billion. This proposal would saddle Long Island with the highest debt level in the history of LIPA. PSEG-LI would again mortgage Long Island’s future with debt.

This rate proposal will have a substantial negative effect on Long Island jobs and the economy. PSEG-LI should have been required to prepare an economic impact statement. Clearly an electric rate increase will be a drag on any economic recovery. Further, it will negatively impact Long Island’s ability to compete economically, as we again send a message to the nation and the world that companies on Long Island will continue to face the highest utility rates in the nation as well as increased debt that will impact rates for decades to come.

PSEG-LI should have been subject to the same cap as local government and school districts face for property taxes, which would be less than 1% this year. PSEG-LI should have been required to live with the same fiscal discipline as the state and local government. First, PSEG-LI failed to demonstrate that any increase is justified.  

In 2013, I voted against the LIPA Reform Act because it did not include the level of oversight necessary to protect the public. This rate increase demonstrates that the Act has no real teeth to protect ratepayers. Long Islanders are totally helpless to control electric costs. The Reform Act needs to be reformed. The Legislature should enact legislation that would (1) elect the LIPA Board of Trustees, (2) restore the oversight role of the State Comptroller and State Attorney General over LIPA/PSEG-LI, (3) provide real regulatory authority to the State Public Service Commission over LIPA rates, and (4) give the LIPA Board broad discretion to consider the impact of a rate increase on Long Islanders and the regional economy.

Today it is clear to all that the LIPA Reform Act is not about reform but guaranteeing the financial interests of a private utility company.

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