Supplemental Service Tariff -
Talking Points February 6, 2001

The Supplemental Service Tariff is an offering by LIPA to participate with Commercial & Industrial customers in attempting to meet the electricity needs of Long Island during the times of highest electric usage. This rate is a partnering effort between LIPA and Long Island businesses that have or choose to have installed onsite generation and that desire to establish a reasonable revenue stream from operation of that equipment. By incorporating the Supplemental Service Tariff with the operation of their onsite generation, customers can realize bill savings that can be applied to partially offset the capital investment as well as the annual operating and maintenance expenses of their generator.

Why is LIPA offering a rate encouraging customers to use their onsite generation?
LIPA has several motivations for implementing the Supplemental Service Tariff (SST), all of which provide a win-win situation for customers and LIPA. It is in LIPA’s interest and the interest of all customers on Long Island to attract as much generating capacity as possible to the area. We all benefit when the generating capacity that exists on Long Island is used to meet our summer demand for electricity. Lastly, by using that generation during summer business hours, customers reduce LIPA’s requirements to buy electric energy when it is most expensive and that saves money for all customers. back to top

Does Long Island Power Authority currently have sufficient electric capacity to serve customers?
During the four-day, July 4th weekend heat storm in 1999, electricity use on Long Island came extremely close to exceeding LIPA’s full resource capacity. And although LIPA has sufficient capacity to meet the current requirements of our customers, we will have to purchase more as usage grows. The SST rate allows customers to provide some of their own generation requirements, reducing the amount of additional capacity that LIPA will need to buy in the future. back to top

Doesn’t LIPA lose money if customers operate their own generation instead of buying power from LIPA?
Not really. LIPA may collect less revenue, but it also avoids buying capacity and energy when it is most expensive, during the summer. The Supplemental Service Rate passes along to customers (in the form of bill savings), the fuel cost savings LIPA achieves from reduced purchase requirements. back to top

Which customers are eligible for service under the Supplemental Service Tariff?
Nonresidential customers with demand over 145 kW in the summer or 500 kW in the winter are eligible. These customers generally receive service under Service Classification No. 2-MRP today. Smaller demand metered customers served under Service Classifications No. 2L, 2H, and 2L-VMRP are not eligible. In addition, the customer must have on-site generation that covers at least 50% of their total summer peak load and cannot be participating in any of the programs offered by NYPA or the municipal electrical agencies. back to top

If I am participating in LI Choice, can I still take advantage of the benefits offered under the Supplemental Service Schedule?
No. Customers participating in LI Choice have their capacity and energy provided by an Energy Service Company (ESCO), not LIPA. Those customers should check with their ESCO to see if a similar service is offered. back to top

What does a customer have to do to take advantage of the Supplemental Service Tariff?
In addition to meeting the eligibility requirements for size of load and size of on-site generation equipment, customers need to apply for the service; arrange for the necessary interconnection equipment; and if necessary, sign a parallel generation agreement with LIPA. Customers are also responsible for meeting all applicable zoning, installation, and environmental requirements associated with their on-site generation. LIPA’s Marketing Representatives can assist interested customers with the application process and answer questions. back to top

Are there any criteria for customers electing to take service under the Supplemental Service Tariff?
Yes. Customers must have a peak demand in excess of 145 kW in the summer or 500 kW in the winter, have on-site generation adequate to meet at least 50% of their summer peak load requirements, and must receive all of their generation service from LIPA. back to top

If I elect to take electric service under the Supplemental Service Tariff, when will I have to run my generation?

Each customer decides when to run generation. However, there are economic incentives for operating the generation during the hours of 12 PM to 8 PM, Monday through Friday, June through September. Customers who operate their generation outside these hours may find their overall savings significantly reduced. In addition, there are economic penalties in the form of lost energy savings when the customer’s generation does not operate during the summer business hours specified above. back to top

What happens if I run my generator during months other than the summer months specified in the Tariff?
There are no penalties for running the generator in the fall, winter or spring months. However, each customer needs to consider whether the cost of fuel and other considerations outweigh the relatively low price that is available from LIPA during the non-Summer months. back to top

What if the size of my generator is larger than one-half of my summer peak demand?
LIPA encourages customers to install generation that is economically justifiable for the customer. Customer bill savings under the Supplemental Service Rate increase with the size of the generation, but at some point, we expect the cost of the additional generation to outweigh the additional bill savings. Each customer needs to determine the best size unit based on their individual situation. back to top
 

Do I have to install any equipment in order to take advantage of the Supplemental Service Tariff?
On-site generation that meets all required zoning, electrical, and environmental requirements and meets at least 50% of your summer peak load is necessary to participate in the Supplemental Service program. Customers will also be charged for the incremental costs for interval metering their loads and their generation outputs. back to top

Will my LIPA electric billing statement illustrate each component of the Supplemental Service Tariff?
Yes. Each charge included in the service will appear on the customer’s bill. This includes the summer demand charge (summer months only), the energy charge, the replacement energy charge, and the service charge. back to top

What happens if my generator fails to operate during the summer month periods?
LIPA will provide replacement energy and capacity if the customer’s generator doesn’t operate during the summer months. Replacement energy, at the specified rate in the Tariff will be provided and billed automatically when the output of the generator falls below its contracted demand level. Customers may also experience an increase in their demand charge if the overall level of service causes the customer to set a new peak demand in the month. back to top

If my generator does fail, will I end up spending more money for electric service?
If your generator fails, LIPA’s bill for electric service will be greater than if the generator was operating. However, the overall cost of electric service under the Supplemental Service Rate will never exceed the electric bill you would have incurred on your original rate had no never switched to the Supplemental Service Rate. back to top

What are the billing economics and can I save money under the Supplemental Service Schedule?
The billing economics are that customers can generally save approximately $90 per year for each kW of on-site generation included in the rate. In addition, bill savings of approximately 4 cents per kWh plus any applicable Fuel and Purchased Power Cost Adjustment (FPPCA) can be saved for each kWh produced by the customer’s generation. The billing economics need to be compared with your cost of fuel to operate the generator, the cost to acquire the generating capacity and other operation requirements to determine your level of potential savings. back to top

Will the Supplemental Service Tariff allow me to fully capitalize the installation of a generator at my facility?
Not necessarily. The Supplemental Service Rate is meant to augment your own business case for stand-by generation and not designed to fully capitalize any customer’s generation equipment. Depending on the costs of your investment in on-site generation and your financing arrangements, it is quite likely that the savings will be inadequate to fully pay for the generator over a reasonable time horizon. On the other hand, customers that already have some on-site generation, or have access to favorable leasing arrangements with equipment vendors, can quite reasonably cover their incremental costs of participating in this program. back to top

I am currently signed up for LIPA’s Peak Reduction Program, can I still take advantage of service under the Supplemental Service Tariff?
It is highly unlikely. The Peak Load Reduction Program pays customers to operate their on-site generation on certain critical days. Participants in the Supplemental Service Rate are expected to operate their generation every day. Since there are no incremental benefits to LIPA from being on both programs, there would be no incremental payments available to the customer under the Peak Load Reduction Program unless that customer could achieve agreed-to demand reduction for Peak Reduction below that achieved by the on-site generation. back to top

Can I decide to switch away from being served under the Supplemental Service Tariff?
Customers can switch from Supplemental Service back to full requirement service if they remove their on-site generation equipment and/or complete 12 months service under this rate. Furthermore, customers who no longer operate their on-site generation equipment (without removing it) will pay the amount for electricity as for full requirement service. Existing Supplemental Service customers that switch to the new rates will not be allowed to return to their previous arrangements. back to top

Can I still participate in the Buy Back and Maintenance Service Tariff?
Yes. The Buy Back and Maintenance Service continues to be available in conjunction with the Supplemental Service Rate. LIPA will continue to purchase any excess output from the on-site generator that is not needed to meet the customer’s energy needs as long as the customer is served under the Buy-Back Service Tariff. The have been no other changes to the Buy Back Tariff.

Do I have to install parallel interconnection equipment to be served under the Supplemental Service Tariff?
It is at your option. Service can be arranged either through the installation of appropriate parallel interconnection equipment or with the addition of a double-throw switch. Consult LIPA for the exact technical specifications. back to top

What if I am already being served under a tariff that covers my on-site generation?
If you are currently receiving supplemental service under the existing tariff arrangements, you may remain under that billing arrangement, or migrate to the new rate. Once you elect the new rate, you may not return to the existing arrangement. back to top

How much effect will the Supplemental Service Tariff have on generation capacity on Long Island?
LIPA estimates that businesses and government units own enough generation to produce as much as 100 megawatts of power. LIPA’s goal in 2001 for this program is to obtain commitments for 8-10 megawatts of customer generation, which represents enough energy to supply approximately 2,500 residential homes. back to top

Will LIPA assist customers in evaluating the benefits of taking service under the Supplemental Service Rate?
Yes. Our Electric Sales and Marketing representatives will be available to assist customers with evaluation and installation recommendations. LIPA wants to ensure that the rate works to the customer’s advantage. back to top

Last Updated: 05/19/2009