2012 Operating Budget FAQ

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What are the Highlights of LIPA’s 2012 Budget?
The 2012 budget includes an overall 1.5%, or $2.20 increase for the average monthly residential bill for customers using 775 kWhs, compared to October 2011, and is comprised of the following:

  • A modest increase in the Delivery Charge resulting in a 1.7% increase in the overall bill.
  • A reduction in the Power Supply Charge resulting in a 0.6% reduction in the overall bill.
  • An increase in the Efficiency and Renewable Charge resulting in a 0.2% increase in the overall bill
  • An increase in Taxes and Other Assessments (because of the changes above) resulting in a 0.2% increase in the overall bill.

The 2012 budget also includes an increase in the benefits associated with the Household Assistance Program for qualified low income residential customers to $5.50 per month.

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Why is the Delivery Charge increasing?
The Delivery Charge recovers the costs owning and operating the Delivery System on Long Island (including the poles, wires, metering equipment and meter reading, customer call center and business offices, and the legacy National Grid Power Plants on the Island). LIPA is proposing a modest increase in this component of the bill. The increase is driven by nearly $75 million of increased costs including:

  • $52 million increase in taxes and assessments imposed on LIPA. Our tax obligations have grown more than 10% a year over the past three years, and we project that the total tax obligation will reach $573 million in 2012 if all the property taxes, revenue taxes and other assessments are combined.
  • $24 million of escalating costs that LIPA must pay contractually associated with the Management Services Agreement and the Power Supply Agreement, and
  • $6 million increase in costs associated with our 2012 storm restoration budget. LIPA proposes to set aside $52 million for storm restoration in 2012. The extraordinary level of spending on storm costs in 2011 is not being recovered from customers, and will be absorbed from LIPA’s financial reserves rather than be recovered from customers.

The Delivery Charge increase is still considerably lower than recent increases received by electric utilities regulated by the New York State Public Service Commission.

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How will the Delivery Charge increase?
For residential and small commercial customers, the increase will be made to the daily service charge, resulting in an overall bill increase of 1.7 percent. This represents a fixed increase to the customer’s bill based on the number of days on each bill, and does not vary by the amount of energy the customer uses. For small time-of-use customers, the daily service charge will increase as will the daily meter charge.

For large commercial customers, the demand charge will increase instead of the basic service charge. The overall average increase to these customers’ bill will be between 1.7-1.9%.

This rate adjustment will go into effect on March 1, 2012 for all rate classes.

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What is the Power Supply Charge?
The Power Supply Charge recovers the cost of the electricity we buy from various electric power producers on behalf of our customers. The biggest part of the Power Supply Charge covers the cost of fuels (petroleum and natural gas) that we buy for use at power plants on Long Island owned by National Grid to produce electricity as part of Long Island’s overall electric supply. This charge also includes the cost of power purchased by us from Independent Power Producers both on and off Long Island.

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How is the Power Supply Charge calculated?
LIPA combines the cost of the fossil fuel with its purchased power costs and bills the Power Supply Charge for all residential and commercial customers based on your individual electric usage. As of October 1, 2011 the basic cost for the Power Supply Charge has been 8.41˘ per kWh and will be reduced to 8.30˘ per kWh effective January 1, 2012. For the typical residential customer using 775 kwh per month, this represents an overall decrease in the bill of 0.6%.

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Why is the Power Supply Charge being reduced by LIPA?
Lower natural gas and purchased power costs in 2012 are responsible for the reduction in the Power Supply Charge.

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What happens if in a couple of months the cost of fuel, like oil and gas, rises or falls? Will the power supply charge be increased or decreased accordingly?
Continuing the practice in 2012 that we implemented in 2011, we will monitor and adjust the Power Supply Charge each quarter if it appears necessary. In 2011, the Power Supply Charge was monitored each quarter, but raised just once, on October 1st, as a result of changes in fuel costs. In 2012, we will track performance and associated customer reaction which will allow us to more closely monitor changes in power supply costs and pass those savings or increases along to customers.
LIPA implements quarterly adjustments of the Power Supply Charge to avoid any under or over collections from customers at year-end, to better conform to regulated utilities, and to help mitigate volatility in customer rates.

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What is the Household Assistance Rate (Low Income) Program?
The Household Assistance Rate is program that is designed to assist customers within certain income guidelines in paying their electric bills. This program is modeled on programs already approved by the New York Public Service Commission for other large utilities. Eligibility is based on existing income-qualified programs such as HEAP, SSI, and Medicaid. LIPA is proposing no increase to the Delivery Charge for customers enrolled in this program. As a result, of the changes in the Power Supply Charge and the Efficiency and Renewables Charge, participating customers should see a slight decrease in their overall bill of approximately 0.4%.

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What is Efficiency Long Island?
In 2009 LIPA introduced Efficiency Long Island which is a 10-year, $924 million customer-funded energy efficiency program that makes a wide array of incentives, rebates and initiatives available to LIPA’s residential and commercial customers to assist them in reducing their energy usage and thereby lowering their bills.

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How is the Efficiency Long Island charge on my bill calculated?
Each year, the Trustees establish the rate, in cents per kilowatt-hour, and on each bill you will be charged that rate times the number of kilowatt-hours on that bill. How much you pay depends on how much you use, but the charge is very small. For the typical residential user, we are proposing an increase from 0.58˘ per kWh to 0.62˘ per kWh in 2012. For the typical residential customer that uses 775 kilowatt-hours per month, the ELI charge would be about $4.80 per month, an increase of about 31˘ per month.

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Is the Efficiency Long Island charge the same or different between residential and commercial customers?
Different charges exist for small and large customers. Small customers include all residential customers and those commercial customers without demand meters (including street lighting, area lighting and traffic signal accounts). Large customers are the commercial demand-metered customers. Each group has its own rate, and recovers only those dollars spent on behalf of those customers. Small customers do not subsidize large customers, or vice versa.

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What are the Efficiency Long Island’s incentives and renewable programs that I can take advantage of?

For Residential Customers:

  • Efficient Products – ENERGY STAR® qualified products; specifically select lighting products, refrigerators, dehumidifiers, and room air conditioners as well as other more energy efficient products such as two-speed and variable speed pool pumps, refrigerator recycling and select ENERGY STAR solid state lighting (SSL) products
  • ENERGY STAR Labeled Homes – includes building shell upgrades, HVAC, hot water, duct seals, lighting and high efficiency appliances
  • Existing Homes – duct sealing and tune-ups for central air conditioners, whole house retrofit assistance and installation services, Residential Energy Affordability Program (REAP), and properly installed higher-than-code efficiency central air and heat pump equipment

For Commercial Customers:

  • Commercial & Industrial (“C&I”) New Construction – targets all new buildings and major renovations
  • C&I Existing Buildings – addresses equipment purchases stemming from natural replacement at the end of useful life and retro-fits (discretionary replacement of functioning inefficient equipment)
  • Small Business Direct- a new program that makes it easier for your business to upgrade to energy-efficient lighting and lighting controls. Qualifying businesses can also save up to 70% on efficiency upgrade costs, including material and installation. That means you could be on your way to saving energy-and money-in no time.

The Efficiency Long Island component also funds renewable programs including solar and wind for both residential and commercial customers. For additional information and more details on all LIPA efficiency and renewable programs visit www.lipower.org/efficiency.

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