SCHUMER, JOINED BY LIPA CHIEF KEVIN LAW, TO UNVEIL NEW FEDERAL PLAN TO ALLOW LIPA TO REFINANCE BILLIONS IN DEBT – WOULD SAVE LI’ERS HUNDREDS ON THEIR ELECTRIC BILLS AND LOWER THEM BY 5 PERCENT

LIPA Spending More than $500 Million a Year to Service $7 billion in Outstanding Debt at Higher Interest Rates

Most of the Debt Originated from the Massive Cost of the Decades Long Shoreham Nuclear Power Plant Debacle

15 Percent of Every Long Island Residents Electric Bill Goes Just to Pay Debt Service – Schumer to Say Refinancing Would Save Consumers Hundreds of Dollars on Their Electric Bills

At the headquarters of the Long Island Power Authority (LIPA), U.S. Senator Charles E. Schumer, joined by LIPA President & CEO Kevin Law, today announced he is introducing new federal legislation allowing LIPA to refinance nearly $7 billion in outstanding debt at a lower interest rate as a way to ultimately save ratepayers hundreds of dollars on their electric bills. Right now, LIPA pays more than $500 million every year to service its outstanding debt a cost that accounts for approximately 15 percent of every Long Island resident’s electric bill. Schumer said that under his legislation, LIPA would be able to refinance that debt at a far lower interest rate, bringing down the debt service costs, and potentially lowering the average electric bill three to five percent. Schumer and Law said that refinancing would free up billions of dollars over the next decade that could also be invested in cheaper, cleaner energy, saving consumers even more.

“The fact that 15% of every Long Island resident’s electric bill goes to pay debt services at LIPA is simply outrageous,” Schumer said. “With so many publicly owned utilities struggling during these tough economic times, we have to do everything we can to provide some relief to LIPA and the millions of families that are simply trying to make ends meet. With my new legislation, LIPA will be able to refinance their $7 billion of debt and save Long Islanders hundreds on their electric bills.”

“LIPA was built on a mountain of debt. With this proposed federal legislation, Long Islanders could get rate relief, debt relief and fossil fuel relief as it could generate more funds for us to invest in renewable sources of energy. I applaud and commend Senator Schumer for his leadership and willingness to help find creative solutions for our massive debt that makes up 15 cents of every dollar our customers must pay,” said Kevin Law, President & CEO, LIPA.

Publicly owned utilities are finding it difficult to finance the provision of reasonably priced electricity to their customers due to the precarious and volatile state of the municipal bond market, the inability to raise capital through equity, the failure of existing government loan programs and public financing incentives, and the daunting technological costs of bringing on line new generation and transmission. Publicly owned utilities need another tool to assist them in delivering reliable, reasonably-priced electricity in these challenging times. Currently, the Department of Agriculture, under the authority of the Rural Electrification Act of 1936, makes direct loans and loan guarantees to electric utilities to serve customers in rural areas. However, large state and city public power companies cannot access such programs.

In the early 1960’s, the demand for electricity was increasing more than 10% per year on Long Island and the federal Atomic Energy Commission (AEC) was strongly urging power companies to use nuclear power. On May 24, 1968, the Long Island Lighting Company (LILCO) announced the filing of an application with the AEC for a construction permit to begin building the Shoreham plant and in 1973, construction on the plant began. The federal Nuclear Regulatory Commission (NRC) ordered design changes which helped contribute to ballooning construction costs of approximately $2 billion by the late 1970s.

Despite overwhelming opposition from the Long Island community, the NRC declared Shoreham safe for operation in 1981. Although state officials were not to approve any LILCO-sponsored evacuation plan, that did not stop LILCO from receiving federal permission for low-power 5% tests in 1985. With the green light from the federal government, the plant operated intermittently over a period of two years, resulting in approximately two full power days by the time it was shut down in June, 1989. The state even attempted to convince the George W. Bush administration that Shoreham should be dismantled but were unsuccessful.

Had the plant not been made operational at 5% power, it would have required only simply demolition, a far less complicated and much cheaper enterprise than the decommissioning LIPA was forced to undertake. Instead, the ratepayers were left to shoulder most of the costs, totaling over $4 billion. The final cost, including decommissioning, was over $6 billion – 80 times the estimated construction cost. LIPA ratepayers ultimately inherited $4.1 billion in debt related to the plant when it took over LILCO in 1998.

LIPA currently has approximately $7 billion of outstanding debt at an approximate combined interest rate over 5%; nearly half of that debt, almost half of which is still attributable to Shoreham. Federal assistance to refinance the interest rate at a below market rate would significantly benefit ratepayers. If LIPA could refinance all its debt at 2%, then rates could be cut by approximately 5%. Fifteen percent of each LIPA bill goes just to debt, thus, LIPA could save approximately $150 million per year with some going to rate relief and debt reduction and some going to investing in renewable energy, smart grid, and repowering.

Schumer’s legislation would create a new program to provide low-rate loans to publicly owned electric utilities to acquire, construct, extend, upgrade, and otherwise improve energy generation, transmission, or distribution facilities. In addition, such loans would be available to restructure existing debt that financed such facilities, like the Shoreham debt.

LIPA, a non-profit municipal electric provider, owns the retail electric Transmission and Distribution System on Long Island and provides electric service to more than 1.1 million customers in Nassau and Suffolk counties and the Rockaway Peninsula in Queens. LIPA is the 2nd largest municipal electric utility in the nation in terms of electric revenues, 3rd largest in terms of customers served and the 7th largest in terms of electricity delivered. In 2010, LIPA outperformed all other overhead electric utilities in New York State for frequency of service interruptions, and ranked second for duration of service interruptions. LIPA does not provide natural gas service or own any on-island generating assets. More information about LIPA can be found online at: http://www.lipower.org.

Media Contact Information
Mark Gross
Phone - (516) 719-9892
Media Pager - (516) 229-7248
media.relations@lipower.org

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