LaValle-Thiele: LIPA must consider fiscal impacts on ratepayers and area economy

The Long Island Power Authority would be required to protect ratepayers when considering a PSEG-LI rate increase proposal under a bill introduced in the state legislature by State Sen. Ken LaValle and Assemblyman Fred Thiele.

LIPA should “protect the economic interests of its ratepayers and the service area” when considering a rate increase proposal, according to the bill. It would also prevent LIPA from increasing rates to offset revenue losses due to ratepayer energy conservation efforts, the legislators said in a joint press release.

LIPA contracts with PSEG-LI to manage its electric system. Under the LIPA Reform Act adopted in 2013, which required LIPA to turn over system management to PSEG, LIPA trustees decide whether to adopt rate increase proposals made by the contractor. The trustees take into consideration the recommendations of the State Department of Public Service.

The trustees can only consider whether or not the public service department’s recommendations are consistent with three narrow parameters, the legislators said. These parameters include “sound fiscal operating practices,” “existing contractual obligations,” and “safe and adequate service.” They are not permitted to consider the economic impact of the rate increase on ratepayers or the Long Island economy.

In 2015, the Long Island Power Authority trustees approved the largest rate increase in LIPA’s history, according to the LaValle-Thiele press release. The three-year increase, implemented between 2016 and 2018, resulted in a cumulative 7.3-percent rate increase in the delivery portion of LIPA bills. The rate increase raised more than $287 million in new revenues.

LaValle and Thiele said the three LIPA trustees who refused to support the rate increase complained that the LIPA reform act is “too rigid” and asked for legislation amending the law to give the LIPA trustees more power and decision-making on behalf of the ratepayers.

The East End legislators noted that State Comptroller Thomas DiNapoli has criticized the lack of regulatory oversight of LIPA and PSEG-LI stating, “We are concerned that there is no true scrutiny of proposed rates …because LIPA Trustees cannot be objective under the current arrangement.”

“In 2015, the flaws in the LIPA Reform Act saddled ratepayers with a three-year increase, the largest in LIPA history. LIPA Trustees implored us to fix the law. We should do so now before LIPA and PSEG-LI can ask for another rate increase,” Thiele said.

“Under the federal tax bill, Long Islanders are already facing a significant economic loss which will cost residents billions in taxes due to lost income tax deductions. At the same time, utility companies could see a windfall in tax reductions,” Thiele said. “Ratepayers and taxpayers are the same people. It is imperative that the LIPA Reform Act be amended so that LIPA considers the economic impact of electric rate increases,” he said.

“In addition, Long Islanders are successfully working hard to reduce energy consumption. They should get the financial benefit of the efforts to conserve and not be punished with higher rates,” Thiele said.

“While we have been working to keep Long Island affordable by implementing measures like the 2-percent property tax cap, LIPA approved the largest rate increase in its history,” LaValle said.

“More than ever, it is critically important that the financial impacts on customers are considered when LIPA deliberates any cost increases,” he said.

“This measure will enable more community input by mandating a public hearing when considering rate changes. In addition, this legislation would provide the trustees with the tools necessary to reject rate increases that would cause additional financial burdens on Long Islanders,” LaValle said.

Last month the governor signed into law a bill sponsored by LaValle and Thiele requiring disclosure of PSEG-LI’s top executives’ compensation and all fees paid to consultants and contractors. The new law empowers the Department of Public Servie to review and make recommendations on the reasonableness of those fees and compensation. The legislators said they sought the legislation because PSEG-LI refused to make that information public. PSEG-LI said the information was not required to be disclosed under the LIPA Reform Act.