Average Long Island electric bills expected to increase $7 a month next year

Average residential electric utility bills are projected to increase more than $7 a month next year as LIPA anticipates higher debt-service costs and slightly increased usage by customers in 2025.

The bill increase reflected in the Long Island Power Authority’s proposed $4.336 billion operating budget for 2025 is below the amount that would trigger a rate review by the state, and considerably below this year’s increase of about $20 a month. LIPA and its contractor, PSEG Long Island, have not been subjected to a rate review by the state Department of Public Service since 2016, due chiefly to delivery rate increases kept below 2.5%, even as other portions of the bill have seen increases.

LIPA’s 2024 operating budget was $4.19 billion.

In a budget to be presented at a LIPA board meeting Wednesday, the utility is proposing average bills of just under $194 a month in 2025, compared with monthly bills this year that totaled an average $186.71.

Average usage next year is expected to increase slightly to around 723 kilowatt-hours per month, compared with this year’s 715 kilowatt-hours, an increase that reflects an improved economy and an increase in electric cars and electric heat pumps.

Customers who hold their usage steady next year will see lower average bill increases of around $5.38, LIPA said.

Delivery and system charges, which make up around half of customer bills, are expected to increase around $4.90 a month, LIPA projects, while the power supply charge will increase an average $1.97 a month. LIPA customers next year will benefit from an offsetting revenue credit of just over $2 a month, but other charges will push bills around $7.27 higher.

Even 2024 bills came in slightly higher on average than LIPA had previously projected, according to the budget, by around 27 cents a month, mostly due to the weather, LIPA said.

Costs associated with LIPA’s $10 billion-plus debt are the biggest driver of this year's increase, LIPA said, and are projected to increase by $106 million next year. The $49 million in higher power supply charges next year are tied primarily to changes in the Regional Greenhouse Gas Initiative allowances next year. Lower taxes on power plants are offsetting some of the increases, LIPA said, noting its challenges to plant taxes over the past decade will save customers more than a half-billion dollars through 2028, when contracts with the National Grid-owned plants are set to expire.

The cost of natural gas and other fuels to run LIPA-contracted plants are expected to increase slightly next year, by $3.6 million, while renewables costs will jump by $9.1 million, LIPA said. Purchasing power from local plants and other sources is expected to decline by $33 million, LIPA said. Property taxes on plants are expected to decline $24 million next year.

Acting LIPA chief executive John Rhodes said the utility has worked to keep bill increases to a "manageable number" for customers, even as the utility is "absorbing a big increase in debt-service costs ... We think this is quite a good outcome and quite good operating discipline."

Projected renewable energy costs of $170.9 million next year are more than double the $83 million spent on renewable power in 2023 and reflect the addition of an anticipated full year of the South Fork Wind Farm. This year, renewable costs are expected to hit $143.5 million. 

Interest expense on LIPA’s total debt load is budgeted at $374.2 million for 2025 and $377.6 million in 2026. LIPA next year anticipates $600 million in new debt issuances, according to the budget.

But even as those debt-service costs increase, LIPA anticipates total debt and lease obligations to decline. LIPA’s total debt load, which amounted to $11 billion at the end of 2023 and includes capital lease costs for certain power plants, is expected to decrease to $10.2 billion by the end of 2026, according to the budget. Debt and lease obligations were projected at $10.2 billion at the end of this year and $10.4 billion by the end of 2025.

Among other cost increases, LIPA expects wages next year to increase by $15.7 million, or 3.5%, tied primarily to a contract reached with unionized PSEG Long Island workers in 2023. LIPA’s proposed 2025 storm budget of about $85 million remains unchanged from this year, even though storm costs in 2024 hit $62 million, nearly triple the $23 million storm costs of 2023.

LIPA customers will get the chance to weigh in on the increases during three public hearings scheduled for November, and the LIPA board will vote on the budget at its December meeting. 

LIPA is in the process of reviewing bids for management of the grid when PSEG's contract expires at the end of 2025. Rhodes declined to comment on the process.

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

Mark Harrington, a Newsday reporter since 1999, covers energy, wineries, Indian affairs and fisheries.