LIPA Proposes 2007 Operating and Capital Budgets for ‘07 & ‘08
Delivery and Power Supply Charges Remain at Lower Level for '07
Fuel & Purchased Power Supply Costs Projected To Reach $2.1 Billion
Public Comment Session Set for November 29th
Uniondale, NY— November 16, 2006—The Long Island Power Authority (LIPA)
today released its proposed 2007 Operating and 2007 and 2008 Capital budgets.
LIPA will maintain the 7.6% Power Supply Charge reduction implemented in October
through all of 2007 – absent a worldwide energy price crisis – and will also
keep its Delivery Charge steady for 2007. Thus, LIPA bills, recently lowered by
4%, will remain at that level for all of next year.
LIPA’s proposed 2007 Operating Budget projects revenues of $3.6 billion. Fuel
and purchased power costs, LIPA’s largest expense, will be approximately $2.1
billion next year, which is 14% over the projected costs for 2006, or 54% of
LIPA’s total budget.
“During this past year, we worked to keep overall expenditures in check to
avoid any bill increases in 2006 so we could reduce the Power Supply Charge by
7.6% in October when fuel and purchased power costs began to drop,” said LIPA
Chairman Richard M. Kessel. “Projecting forward for 2007, our goal is to
continue to keep operating expenses as low as possible, and maintain the bill
reduction. If oil and fuel prices continue to decline, a further bill reduction
is possible.
“Fuel and purchased power costs went through the roof in 2005 and continued
to be the largest component of our budget in 2006,” said Mr. Kessel. “For 2007,
we’re projecting an expenditure of
$2.1 billion and while that amount is not as high as it could have been had oil
and natural gas prices not moderated in 2006, it’s still 14% higher than the
projected expected expenditure for 2006.
“Fifty-four cents of every revenue dollar LIPA spends goes for oil, gas and
purchased power costs,” said Mr. Kessel. “We spend another 21 cents of every
dollar to cover operating and maintenance costs; 10 cents for interest expense;
7 cents for depreciation and amortization; 7 cents on revenue taxes and Payments
in Lieu of Taxes (PILOTS) and 1 cent for administration and general expenses.
“We’re hopeful that oil and natural gas costs will abate further in the
months ahead so we can reduce the current Power Supply Charge even more,” said
Mr. Kessel.
For the fourth consecutive year, the proposed Operating Budget contains a
five-year financial plan.
OPERATING BUDGET HIGHLIGHTS
LIPA’s 2007 Operating Budget projects revenues of approximately $3.6
billion, which is a decrease of about 1.6%, versus the projected level for 2006.
The decrease reflects the lower Power Supply Charge that became effective
October 16th and is projected to remain in effect throughout 2007.
Electricity sales for 2006 are projected to be 20,130,617 Megawatt Hours (MWh),
or 1.1% above 2006’s projected sales, as normalized for the effects of weather.
LIPA forecasts that it will spend approximately $2.1 billion for fuel and
purchased power before accounting accruals and amortizations in 2007, which is
an increase of 14%, over the 2006 projected expense level. Fuel and purchased
power costs have risen as a percentage of LIPA’s operating expense from 31% in
1999 to 54% for the proposed 2007 budget. Over the last nine years, fuel and
purchased power costs have increased a staggering 288%, from $719.3 million in
1999 to over $2.1 billion for next year, but LIPA’s bills have not increased an
equal amount.
The proposed Operating Budget projects $771.2 million in Operations and
Maintenance expenses for 2007, which are about the same as the projected O&M
expenses for 2006. O&M expenses are comprised primarily of costs related to the
transmission and distribution system management and power supply agreements with
KeySpan.
General and Administrative expenses for 2007 are budgeted at $47.5 million.
Depreciation and Amortization expenses are budgeted at $248.5 million. Revenue
Taxes are budget at $57.7 million. Payments In-Lieu-Of Taxes (PILOTS) are
budgeted at $175 million. LIPA also pays $156 million in
PILOTS on KeySpan’s generating assets under the terms of its Power Supply
Agreement with KeySpan. Combined, LIPA will pay $331 million in PILOTS in 2007.
Interest expenses are projected to be $346 million. The average level of debt
outstanding during 2007 is forecasted at $6.9 billion.
CAPITAL BUDGET HIGHLIGHTS
LIPA’s proposed Capital Budget for 2007 allocates $317 million for electric
transmission and distribution system improvements as well as other capital
needs, which is an increase of $31 million, or 11%, when compared with the
projected expenditure level for 2006. The projected Capital Budget for 2008 is
$291 million, a decrease of $26 million, or 8%, from the 2007 proposed budget.
Since acquiring the Island’s Transmission & Distribution system in May of 1998,
LIPA has spent over $2 billion to upgrade Long Island’s electric grid to improve
reliability and increase its ability to deliver an ever increasing amount of
electricity annually. LIPA’s reliability is first in the state for overhead
utilities.
LIPA proposes to spend approximately $52.4 million on energy efficiency and
alternative energy technology programs in 2007, under its Clean Energy
Initiative (CEI) programs, which is about $16 million over the projected 2006
spending level. Much of the increase relates to the timing of the implementation
of LIPA’s 75 megawatt RECAP energy efficiency program.
For the fourth year, LIPA’s proposed budget also includes projected revenues
and expenses going forward four years to the year 2011. LIPA anticipates its
operating expenses will be: $3.6 billion for 2008; $3.5 billion for 2009; $3.4
billion for 2010; and $3.5 billion for 2011. These are expense projections that
could change over time due to changes in sales and costs, especially costs for
fuel and purchased power.
“The proposed budget for 2007 allows LIPA to maintain the Power Supply
Reduction implemented last October through the end of the year as promised while
continuing to deliver an adequate and reliable supply of electricity to our
customers and meet LIPA’s financial reserve target,” said Mr. Kessel.
“Sufficient funding is also provided to meet LIPA’s overall PILOT [Payments
In-Lieu-Of Taxes] obligations to local governments and school districts,
maintain our aggressive energy conservation and efficiency initiatives, and
further enhance electric system reliability.”
LIPA’s proposed 2007 Operating and Capital budgets for 2008 and 2009 are
available on LIPA’s
Web site at www.lipower.org.
A public comment session on LIPA’s Operating and Capital budgets will be held
November 29, starting at 10:30AM at the Long Island Hilton on Route 110 in
Melville.
Comments on the budgets may also be submitted by e-mail via LIPA’s Web site.
It is anticipated that the LIPA Board of Trustees will consider the adoption
of the proposed budgets at its December 14th meeting, which will be held in
Uniondale starting at 11AM. |
