Change in Energy Delivery Methodology
If after browsing our frequently asked questions, you still have a question, feel free to contact us. Call 1-800-490-0025 or 631-755-6000- Monday - Friday: 8:00am to 8:00pm, except holidays.
- What is the $129 million adjustment to the FPPCA related to?
- What is the amount of the adjustment to the Power Supply Charge per customer?
- Why is LIPA adjusting the income over three years?
- How will this adjustment be applied?
What is the $129 million adjustment to the
FPPCA related to?
All electric utilities, including LIPA, provide
continuous service to customers and generate revenues based
on consumption and price, which vary from month to month and
year to year due to numerous factors such as weather,
seasonal usage and fuel and purchase power costs. Utilities
also experience different kinds of electricity “losses” in
connection with serving customers, which include losses in
lines during the transmission and distribution process. Like
all other electric utilities, LIPA recovers the cost of
these losses through its rates in order to recover the cost
of fuel required to produce that electricity. The
methodology that has been used to estimate the amount and
price of those lines losses has been changed because it was
determined that the calculation being used became inaccurate
over time, and resulted in the collection of $231M of
revenue, of which $129M would have been used to offset costs
during that time. The LIPA Board of Trustees has determined
that even though LIPA has no shareholders, and that any
unrecognized “income” earned in prior years was otherwise
used to benefit its customers and contribute to LIPA’s
overall financial health, adjusting the power supply charge
going forward by $129M is appropriate at this time.
What is the amount of the adjustment to
the Power Supply Charge per customer?
Beginning April 2011, LIPA’s average residential
customer will receive the benefit of approximately a $2.85
per month reduction in 2011 as a result of the adjustment.
In 2012 and 2013, LIPA’s average customer will receive the
benefit of approximately a $1.50 per month adjustment.
Why is LIPA adjusting the income over
three years?
LIPA is adjusting for almost half of the $129M reduction
in 2011 and the rest over the next two years in order to
better preserve rate stability and minimize the impact on
cash flow which could otherwise lead to increased borrowing
to continue its operations. Specifically, $111M of the $129M
adjustment is being used to offset under-recovered 2003 fuel
costs that customers are paying back over ten years, three
of which are left. So, customers will not be charged for the
rest of that $37M annual obligation in years 2011, 2012 and
2013 (which amounts to the $111M), and will receive the
remaining $18M in 2011.
How will this adjustment be applied?
LIPA will calculate its Power Supply Charge to provide
for the reduction and it will be automatically included in
your bill commencing in April 2011.
