LIPA & National Grid/KeySpan Announce Agreement on
New Contracts
Significant Ratepayer, Reliability & Repowering Benefits for LIPA’s
Customers and Region
Melville, N.Y. – March 23, 2007 – The Long Island Power Authority (LIPA)
today announced that an Agreement in Principle has been reached with National
Grid/KeySpan on a series of contract-related issues that will provide
significant ratepayer, reliability and repowering or power plant emission
reduction benefits to LIPA’s electric customers and to the Long Island region.
When combined with the significant package of benefits resulting from an
earlier negotiated extension of its Management Services Agreement with KeySpan
that was announced in December, 2005, the economic benefits of both agreements
are valued at approximately $236 million. Additionally, savings of approximately
$34 million per year to be derived from lower fees paid by LIPA under the
Management Services Agreement.
“We have been engaged in extensive and deliberate process that has allowed
LIPA to achieve its goal of obtaining the maximum amount of economic benefit for
Long Island’s electric consumers from the planned acquisition of KeySpan by
National Grid,” said both LIPA Chairman Kevin Law and LIPA CEO/President Richard
M. Kessel. “We believe the proposed agreement with National Grid/KeySpan
provides a range of benefits for LIPA’s customers that will help stabilize or
even reduce electric rates and charges, maintain our high level of electric
system reliability, and provide an affordable approach to repowering and/or
power plant emission reductions.”
“National Grid looks forward to working with LIPA to bring the assets and
expertise of a global company with the continued benefits of expert local
management and a strong commitment to Long Island,” said National Grid Chief
Executive Steve Holliday.
“With its knowledge and expertise, National Grid is the best company to
assist Long Island as it addresses the challenges of energy supply and
efficiency in the future,” said KeySpan’s Chairman and CEO Robert Catell.
“National Grid’s excellent record in environmental stewardship and
forward-thinking positions on climate change are a timely addition to Long
Island’s energy landscape.”
“IBEW Local 1049 members take great pride in building and maintaining a safe
and reliable electric transmission and distribution system,” said Robert Shand,
Business Manager of IBEW Local 1049. “We believe that to continue to maintain
the high standards that we have achieved, reliability and performance metrics
tied to financial incentives and disincentives are necessary. We commend LIPA
and KeySpan/National Grid for reaching an agreement that will maintain the
skilled workforce necessary to provide the first class energy delivery system
Long Islanders so richly deserve.”
"This agreement shows a commitment by National Grid and LIPA to provide
excellent service and reliability to the electric customers of Long Island, and
to do it with an experienced and dedicated Union work force," said Donald J.
Daley, Jr. Business Manager, Local 1381, IBEW.
Highlights of Benefits to LIPA Customers
LIPA’s customers will benefit in many ways as a result of the combined
elements of both the December 2005 LIPA/KeySpan Definitive Agreement and the new
LIPA/KeySpan/National Grid Agreement in Principle. These benefits include:
Ratepayer Economic Benefits: ($236 Million)
- $120 million settlement of disputes that had arisen under the terms of
the original Management Services Agreement with KeySpan;
- $34 million net present value in annual operating cost savings through
2013;
- $91 million in synergy savings taken over the remaining seven-year of
the MSA term of the period;
- $7 million in incremental cash consideration to LIPA;
- National Grid will provide $12 million to fund a LIPA/National Grid
joint effort to promote electric and gas efficiency programs;
- Freeze transportation rate for the delivery of natural gas to power
plants on Long Island at the current level through May 2013; and
- National Grid will not initiate any property tax rate challenges on its
Long Island generation assets without prior approval by LIPA.
Reliability & Service Benefits:
- National Grid will provide $6 million in funding for LIPA’s Storm
Hardening Initiative;
- National Grid agrees to maintain on-island field personnel at mutually
agreed upon levels to meet LIPA’s target performance metrics or suffer
financial penalties;
- National Grid will maintain its customer service functions – Customer
Call Center and District Offices – on Long Island;
- National Grid will integrate its Long Island storm response priorities
with its other US operations which will provide LIPA with a “first call”
opportunity that can quickly move upstate and out of state National Grid
crews to Long Island to assist with an enhanced restoration response to
severe storms and emergencies;
- National Grid will follow LIPA’s directives regarding service
performance, emergency response, and capital projects;
- Eighteen performance metrics have been established that can trigger
financial penalties if not met; and
- Greater information access and operational transparency provided to LIPA
on a daily basis.
Repowering and/or Emission Reduction Benefits:
- LIPA obtains the option to purchase at book value the E.F. Barrett plant
and Combustion Turbines and the Far Rockaway generating plant for the
purpose of repowering;
- LIPA also obtains the option to purchase KeySpan’s fleet of Combustion
Turbines (peaking units) at Wading River and at Shoreham for 1.25 times book
value. This option enhances repowering opportunities at all of these
locations;
- National Grid commits to begin to install $100 million in NOx emission
reduction equipment and efficiency improvement equipment at Northport units
and NOx reduction equipment at Port Jefferson units immediately. The level
of cost recovery for these improvements will be limited to the level of fuel
and emission allowance savings achieved during the term of the Power Supply
Agreement;
- National Grid and LIPA will perform a detailed Northport plant and Port
Jefferson plant engineering and economics repowering studies;
- National Grid will provide summer availability replacement power
insurance for a minimum of 3 years; and
- LIPA gains the Right of First Refusal if National Grid proposes to sell
its generation to a foreign-controlled entity.
LIPA will schedule a public information session on the new Agreement in
Principle with National Grid and KeySpan.
The LIPA Board of Trustees must review the Agreement and if approved by the
Board it will then be sent to the State Attorney General’s Office and the State
Comptroller’s Office for review and approval. |
