LIPA OKs measure that allows increases in customer charges

Long Island Power Authority trustees overwhelmingly approved a measure Thursday that allows the authority to increase customer charges by more than a planned rate hike when sales are affected by green-energy programs, unexpected weather or economic shifts.

The measure, known as revenue decoupling, has been widely adopted by investor-owned utilities as a way to assure the companies support green-energy measures even if it means a drop in sales.

For LIPA, a public power authority, the measure will provide a semiannual mechanism to recover fixed costs when sales differ from projected levels. The mechanism would allow PSEG Long Island to charge customers beyond the 3.9 percent yearly rate hike it is proposing for 2016-18. Customers could see refunds if sales come in above projections. Over the past three years, the mechanism would have allowed LIPA to recoup $188 million in lost sales.

Decoupling won't impact customer bills until next March.

At the board meeting, trustees largely applauded the measure, saying it would speed adoption of programs such as Utility 2.0 that seek to reduce hundreds of megawatts of system demand, and save customers money.

"My hope is that it saves customers money over the short term and long term," trustee Mark Fischl said after the meeting.

Board member Matthew Cordaro, noting LIPA as a public authority had no shareholders or profit motive, said the measure removed the "urgency and pressure" on the utility to live by its estimates. He also noted that raising rates in a sour economy could impact customers who themselves might be struggling financially.

"It's another blank check on top of other blank checks," he said after the meeting, referring to other mechanisms the authority has built into its recent rate proceeding to recoup.

But LIPA finance chief Tom Falcone said LIPA doesn't have "perfect rate-setting mechanisms" to cover fixed costs when revenue falls below projections, including during cooler summers.

"You budget for normal weather, but you really just can't predict the weather," he said, emphasizing that LIPA was "not looking to make money."

LIPA Thursday also released its year-end financial statement. Revenue for the year was $3.61 billion compared with $3.75 billion in 2013. LIPA attributed the decline to milder summer weather in 2014.

LIPA ended 2014 with $40 million in excess collections from ratepayers for fuel and purchased power costs. The money is being returned to customers through lower power supply charges this year.

The measure passed 7-1, with Cordero the sole no vote.

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

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