LIPA 2021 budget expected to hold the line on rates

LIPA bills are expected to remain relatively stable or slightly decline next year, as the utility tightens its belt with a flat $3.72 billion operating budget amid economic uncertainty tied to COVID-19.

Typical residential customers could even see average monthly bills decline to $163.83 in 2021 compared with an average bill this year of $167.62, LIPA said in a budget document released Tuesday.

The overall decline comes despite some increases in costs, including an anticipated $9.5 million increase in the amount LIPA sets aside for bad debt to $30.3 million — debt tied to tens of thousands of customers in arrears or unable to pay their bills due to the pandemic.

LIPA beginning next year could recoup over-budget losses from bad debt through a new surcharge to customers, along with costs tied to storms and COVID expenses. But customers won’t see those surcharges until 2022, if LIPA must enact them, said LIPA chief executive Tom Falcone.

"If our estimate on uncollectibles is reasonable it [the surcharge] will be zero," in 2022, Falcone said. "We’ve budgeted for a sharp recession. It could go either way … Could it be worse or a little better? We’ll see."

The utility expects its total sales of electricity next year to decline by 3.4% compared with 2020, reflecting "continuing weakness in the current economic outlook mainly due to the COVID-19 pandemic." An expected decline next year in commercial sales could be partly offset by an increased residential use, LIPA said.

Despite the expected total bill decline, one central part of the bill called the delivery rate is expected to go up by $1.69 a month next year, tied to higher debt expenses, the increased bad debt expense and higher storm costs.

Meanwhile the power supply charge, a fluctuating representation of the cost to buy power and fuel, is expected to decline by $2.80 a month next year, LIPA said. That’s partly based on the expiration of three contracts to purchase capacity from two peak-power plants and one renewable energy contract, which were not renewed. LIPA also expects to close two small peak-power plants in coming months, for additional savings.

LIPA is also reducing its charges on bills for green energy programs by 41 cents per month, while other adjustments on the bill will drop $2.27 a month, according to a LIPA budget document.

One component of that drop is a decline in part of the bill known as "revenue decoupling" tied to residential customers using more energy this year, leading LIPA to return a portion of that next year, said Falcone. Commercial customers may see an increase in that decoupling charge, though LIPA is moving to soften the burden by restricting such hikes to no more than 5% a year.

The anticipated decline in the power supply charge in the LIPA budget amounts to a cumulative $69.4 million drop, LIPA said, while LIPA expects debt and related costs to increase by $22.9 million, and PSEG’s annual cost for outside contractors to go up by $11.1 million.

LIPA next year is also increasing its storm budget by $10 million to $70 million, while union wages will see a $9 million bump, and property taxes will increase by $6.5 million.

Meanwhile, LIPA’s so-called Utility 2.0 budget for green-energy programs will decline by $14.4 million from 2020, due in part to lower than expected costs for smart meters, which are already installed in over 700,000 of customer homes.

The budget must be approved by LIPA trustees, who will meet virtually on Wednesday to review it. Visit www.lipower.org for more information.

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

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