LIPA proposes shifting rates to reward off-peak power usage

The Long Island Power Authority is proposing a new rate structure for 2024 that will reward those who shift more of their usage to off-peak power periods, with an innovative first-year money-back guarantee if customers' bills rise under the new plan.

LIPA has had time-of-day, or time-of-use, rates in the past, but under the new, more simplified structure, most customers will automatically be enrolled next year and must opt out if they don’t want to participate.

The new structure imposes a higher rate during the peak hours 3 p.m. to 7 p.m. and provides discounts for those who shift usage off those peak times. Weekends, nights and federal holidays would all be considered off peak. There also will be a super off-peak rate that could save customers money by shifting more of their usage overnight.

LIPA estimates that the vast majority of customers will save about $3.50 a month under the new rates, even without changing their habits, and save even more if they shift their habits. Precooling rooms with air conditioning, for instance, before the higher 3 p.m. peak begins could save customers up to $8.50 a month, while charging an electric vehicle after 10 p.m. could save more than $50 a month.

The new rates, if approved by the LIPA board in March, would be phased in starting in February 2024, though customers can opt in starting this fall if they choose. Existing time of use plans will phase out next year.

"We do think this is better for nearly all customers and we want them to try the rate and feel comfortable seeing how it works," said LIPA Chief Executive Tom Falcone, who noted other utilities who've tried it have seen a 6% to 8% reduction in their peak-power needs. "It's like getting rid of a power plant," Falcone added, with cost reductions that are passed on to customers.

In a prospective analysis provided by LIPA, the discounted rate for those who shift to off-peak usage would vary from 20 cents a kilowatt-hour from June 1 through Sept. 30, to 18 cents a kilowatt-hour for the remainder of the year. Peak rates would rise to 39 cents a kilowatt-hour for usage between 3 p.m. and 7 p.m. from June 1 through Sept. 30, and 37 cents a kilowatt-hour for the remainder of the year. Average LIPA customers now pay about 26 cents a kilowatt-hour for power.

The super off-peak rate would offer power at 13 cents a kilowatt-hour for those who shift usage to 10 p.m. to 6 a.m. during the summer period, but the cost of peak power during that period spikes to 44 cents a kilowatt-hour in summer and 34 cents in winter. Standard off-peak for that plan is between 25 cents and 19 cents a kilowatt-hour for summer and non-summer, respectively.

Those rates include only the delivery and power supply charges, not other bill elements such as the delivery service adjustment and a renewables charge. And the rates would fluctuate somewhat monthly with changes in the cost of power, LIPA said. The new rates apply to residential customers. Commercial customers, some of which already operated under time-of-day rates, would see new rates in 2025, LIPA said. 

For those who choose to opt out of the time-of-day plan, a new flat rate of 24 cents a kilowatt-hour would be available for all hours in the summer period, dropping to 21 cents a kilowatt-hour from Oct. 1 through May 31.

Bay Shore ratepayer Holly Gordon said she'd be interested in hearing about how all-electric customers would be impacted by the new rates, because if it's freezing outside, she has no option but to raise the heat during the winter peak. "It's interesting," she said of the plan. "We'll see if it makes a difference. I need to see the specs before giving it a shot."

Falcone said LIPA plans to come up with a time-of-day rate design for all-electric customers before year end. 

Anthony Leteri of Fort Salonga said he'd be willing to try the new rate, but said he wished the service provider would focus first on making sure his outage-prone neighborhood was addressed first. "Under normal circumstances, I'd like to give it a shot," he said. "I want to help, but I don't have a lot of faith in the utility." 

Falcone said PSEG LI's compensation will be based on its execution of the plan, and that the phase-in period will allow LIPA to course-correct if needed. "Our job is to make it really easy," he said. "The peak is 3 p.m. to 7 p.m. Save after seven."

Shifting usage of some basic appliances to off-peak can shave an average 50 cents a month for a dishwasher to $2.25 a month for an electric dryer, according to LIPA estimates. Shifting to the super off-peak could save even more — $1.50 a month for turning on the dishwasher between 10 p.m. and 6 a.m., and $6 a month for the electric dryer, LIPA estimated.

LIPA vice chairman Mark Fischl said he’s been advocating for the change for years, convinced that getting customers to use less electricity during the extreme summer peaks will reduce costs by requiring fewer power sources.

“It’s all about demand destruction,” he said. That’s because under the current state power scheme, LIPA must have excess capacity year-round to handle the highest level of demand that occurs on a few hot summer days.

“Imagine having a party for 50 people with 50 parking spaces once a year and rest of year you have to have 50 parking spots you never use,” he said. “That’s what we do.”

The state has been working for years to implement policies that even out peak usage from the current summer peak. New requirements for heat pumps, for instance, will shift the state to more of a winter peak period. Electric cars, which have seen surging growth rates, are expected to become the prominent form of transportation in coming years, necessitating the transition to nighttime charging.

Under the plan, which also will be the subject of public hearings, PSEG will alert customers to the coming rate change, with alerts 90, 60 and 30 days before it rolls out. Customers can opt out of the new rate to remain either with the standard rate or the new flat rate.

Hearings on the new rates are scheduled for Feb. 21 in Hauppauge and Uniondale at 10 a.m. and 6 p.m., respectively. The LIPA board will vote on the proposals at its March 29 meeting.

Customers can submit written comments via email to: TODpubliccomments@lipower.org.