LIPA Files Petitions with State Public Service Commission
Voluntarily
Requesting Review of its Fuel Surcharges
Uniondale, NY – May 3, 2006 – The Long Island Power Authority (LIPA) today
announced that it has voluntarily filed with New York State’s Public Service
Commission (PSC) two petitions seeking PSC review of LIPA’s fuel surcharge
including the appropriateness of its charges to customers and seeking a
confirmation that LIPA is treating fuel and purchased power costs properly and
similar to other New York electric companies.
LIPA said that it was taking this action because the PSC is recognized for
its expertise in this area, and its independent review of LIPA’s procedures
would assure Long Island’s electric consumers that the Authority has acted
appropriately and in the best interest of its customers.
LIPA Chairman Richard M. Kessel said that LIPA’s analysis concludes that the
Authority has permanently absorbed fuel and purchased power costs of
approximately $900 million – costs normally passed on to customers.
LIPA’s first petition seeks a declaratory ruling regarding the PSC’s
interpretation of its rule on escalation clauses, that the PSC allows utilities
to automatically recover increased fuel and purchased power and other costs
through escalation clauses. Specifically, the petition asks the Commission to
address the cost categories that the PSC allows utilities to recover through
escalation clauses or other Commission rules. LIPA maintains that the Commission
allows utilities in New York State to recover through escalation clauses a range
of costs beyond fuel costs, as LIPA does currently through its fuel and
purchased power cost adjustment.
The second LIPA petition asks the Commission to confirm the appropriateness
of the actual costs that LIPA recovers through its fuel and purchased power cost
adjustment clause. LIPA is asking the PSC to fully review these costs and
determine whether LIPA is charging its customers appropriately for fuel and
purchased power.
Figures submitted by LIPA with its petitions to the PSC, show that the
Authority’s fuel and purchased power costs increased 244% from $713 million in
1999 to more than $1.74 billion in 2005 before accounting deferrals and credits.
Of that increase, 65%, or $664 million resulted solely from higher oil and
natural gas prices; $376 million resulted from higher purchased power costs
driven by higher commodity prices, and increased demand for electricity by LIPA
customers.
Additionally, the data submitted by LIPA to the PSC shows that LIPA’s Fuel
Hedging Program saved almost $300 million in fuel costs over a four-year period
from 2002 through 2005, and that LIPA has permanently absorbed almost $900
million in recoverable fuel and purchased power costs since 1999. Without the
successful Fuel Hedging Program and LIPA’s ability to absorb a significant sum
of recoverable costs, customer bills would be much higher than they are now.
LIPA indicated that electric rates in 2005 alone would have been 7.4% higher had
the Authority not absorbed $180 in ’05 fuel costs.
“As the cost of the fuels needed to produce electricity rose to record levels
in recent years, LIPA has done an extraordinary job of holding down the ultimate
cost of the electricity it delivers to its customers,” said LIPA Chairman
Richard M. Kessel. “While I know bills are high, all of the increases are
related to skyrocketing oil and natural gas prices over which we have no
control. In fact, bills in 2005 would have been 7.4% higher if we hadn’t
absorbed almost $180 million in higher fuel costs in that year alone.
“It’s easy to forget that a barrel of oil cost about $15 when LIPA cut
electric rates by an average of 20% in May of 1998,” said Mr. Kessel. “It’s also
easy to forget that a gallon of regular gas cost only $1.18 back then.
“The post-9/11, post-Katrina world is totally different,” Mr. Kessel said.
“The cost of a barrel of oil has risen to heights unimagined even just two or
three years ago. In 2003, no one predicted that oil would go past $75 per barrel
or that gasoline would cost more than $3 per gallon at the pump. And right now,
no one is able to predict where it will stop.
“In confronting those unprecedented cost pressures, and to protect our
customers from the full impact of increased costs, LIPA took prudent and
reasonable actions over the years to limit the impact of the rising costs of
fuel and purchased power on our customers as much as possible,” said Mr. Kessel.
According to Mr. Kessel, the petitions filed with the PSC request that the
fuel cost escalation clause adopted by LIPA over the years, in an open and
public process, be fully reviewed and that they are deemed to be appropriate and
justifiable.
“It is our hope that the PSC will accept our petitions and address our
request as quickly as possible so LIPA’s customers can be confident that the
Authority is following a process that is similar to those used by other
utilities in New York State,” said Mr. Kessel. |
