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LIPA Advances Plan to Freeze Electric Bills for Two Years;

Provide Modest Rebates; Reduce Long-Term Debt
Public Input Sessions Set for January 24th

Uniondale, NY – January 11, 2006 -- Long Island Power Authority Chairman (LIPA) Richard M. Kessel today announced the details of a Ratepayer Protection Plan that seeks to stabilize LIPA’s electric rates and charges for a minimum of two years, provides $40 million in cash rebates for customers, and reduces LIPA’s long-term debt. The multi-faceted plan uses cash and credits that will accrue to LIPA’s benefit under the agreement between LIPA and KeySpan that was announced by Governor George E. Pataki last month.

“One of the biggest problems consumers encountered last year, as a result of unprecedented oil and natural gas price increases that forced prices to record or near-record levels, was the volatility and unpredictability in the cost of all forms of energy,” said Mr. Kessel in announcing the plan.

“LIPA’s Ratepayer Protection Plan,” said Mr. Kessel, “seeks to bring stability and predictability – barring an energy price crisis caused by a Katrina-like storm or unprecedented commodity price increases – to the price of electricity on Long Island so that at the very least, residential and commercial customers can budget with some certainty for electric costs.”

The Ratepayer Protection Plan seeks to achieve five major objectives:

• Freeze electric bills for at least two years through the creation of a $100 million fuel cost reserve fund that will help absorb future increases in fuel and purchased power costs.
• Provide immediate customer benefits by using approximately $40 million to send a one-time $35 per customer cash rebate to LIPA customers.
• Furnish a long-term customer benefit by using approximately $28 million to pay down an additional portion of the debt related to the now closed Shoreham nuclear power station.
• Foster greater utilization of solar power on Long Island by using $1 million to enhance LIPA’s Solar Roof Initiative in 2006 that will help Long Island lower its dependence on fossil fuel-generated electricity.
• Assist lower income customers who use electricity for home heating purposes with a $250,000 fund to help pay a portion of their winter electric bill.

Mr. Kessel said that while cash rebates would allow customers to use the money as they wished, and inject $40 million into the Long Island economy, the ability for LIPA to hold bills at the same level for at least the next two years would send an important signal that Long Island can be competitive in energy costs at a time when other utilities will be increasing their bills.

Most other utilities have been increasing their bills in the last year to pay higher fuel costs, Mr. Kessel noted. From January 2005 to January 2006, LIPA increased its bill by 20.2%, while Con Ed increased its bill by 34.8%, Connecticut Light & Power by 22.4%, and Central Hudson Gas & Electric by 13%. Furthermore, current gasoline prices on Long Island are 28.6% higher now than one year ago, and home heating oil is up 22.9% since last year.

Mr. Kessel underscored that fuel and purchased power expenses represent the single largest expenditure in LIPA’s annual operating budget. For 2006, LIPA has budgeted $2.086 billion – an increase of $345 million over 2005 – to cover the cost of the fuel required to generate the electricity it acquires for its customers or the power it buys from various on- and off-island electricity suppliers.

Fuel and purchased power costs have risen as a percentage of LIPA’s operating expenses from 31% in 1999, when $713 million was allocated for these costs, to 56% of the 2006 budget. Over the last seven years, LIPA’s fuel and purchased power costs have increased a staggering 184%.

[LIPA does not currently own any on-island electric generating assets. It acquires the bulk of the electricity it supplies to its customers from a variety of sources both on and off Long Island.]

Funding for LIPA’s Ratepayer Protection Plan, and to enhance its Solar Roof Initiative and assist lower income customers, will come in part from $120 million in cash and credits that LIPA will receive from KeySpan for the resolution of outstanding “global issues” between the two entities, and lower fees and related costs resulting from the restructured Management Services Agreement with KeySpan.

LIPA has scheduled two public comment sessions on its Ratepayer Protection Plan. Both sessions will be held on Tuesday, January 24. The first session will be held at LIPA’s Uniondale Executive Offices in the Omni Building at 333 Earle Ovington Blvd., in its 2nd floor Assembly Center starting at 4PM. The second session will be held at the Brentwood Campus of the Suffolk Community College, in the Sagtikos Arts & Sciences Center, starting at 7PM.

The Ratepayer Protection Plan will go before the LIPA Board of Trustees for review and approval at its meeting scheduled for 11AM on Thursday, January 26th, in the Lower Level Teleconference Center of the Omni Building in Uniondale.

The State Attorney General and State Comptroller must also review and approve LIPA’s proposed Ratepayer Protection Plan, before it can be fully implemented.

It is anticipated that once all of the reviews have been completed, customer rebate checks could be put in the mail by early March.