LIPA struggles with 2013 budget as it faces Sandy's costs

As LIPA formulates a 2013 budget that is already several weeks late because of superstorm Sandy, the embattled authority also must deal with a looming storm bill of hundreds of millions of dollars while facing political pressure not to raise electric rates.

The Long Island Power Authority's preliminary estimate for Sandy expenses is around $800 million, but a bill increase does not appear to be on the cards. "Clearly a rate increase would not be appropriate at this time, and it would not be supported by the administration," a Cuomo administration official said Thursday.

The Federal Emergency Management Agency is working with a reimbursement rate of 75 percent for Sandy-related electric system costs, spokesman Ed Conley said Thursday. LIPA would be expected to cover the remaining 25 percent. The agency's portion could increase to 90 percent if total FEMA costs in the state reach a certain threshold, Conley said.

The current reimbursement rate would leave LIPA on the hook for around $200 million, which, if paid in the coming year, could translate into a 5 percent bill increase.

So not raising rates could challenge LIPA financial staff and the trustees' financial committee to find other ways to cut costs as storm bills become due in the months ahead. Observers say they expect LIPA to turn first to programs such as solar rebates or energy efficiency to pay its storm bills without raising rates. The 2012 budget for renewables and efficiency programs was $119 million.

But one LIPA trustee said he would resist any effort to trim the programs, and said a small rate increase would be preferable. "I would be very hesitant to see cuts in those programs because they are part of a long-term strategy that saves money," Neal Lewis said.

Assemb. Robert Sweeney (D-Lindenhurst), whose district includes people who were among the hardest hit by Sandy, said, "We're at a time and a point where everybody has to get creative in terms of being able to pay the bills without putting the burden on people who, especially right now, are overburdened."

Spokeswoman Elizabeth Flagler said LIPA is "several weeks behind in preparing the budget due to Sandy," so details won't be released until after the board's finance and audit committee meets Dec. 6. A full trustees meeting is set for Dec. 13.

The local solar-power industry is bracing for cuts but hopes they won't be too deep. "Our big concern is if the [solar] program were impacted in a way that people would have to start to reduce the size of their companies, it would put people out of work and companies out of business," said Sail Van Nostrand, former chairman of the Long Island Solar Energy Industries Association.

He suggested a better approach would be to "cobble together something that keeps the industry working," including a mix of program cuts, a small rate increase and perhaps borrowing to pay the storm bill. "The trick here is to maintain some sort of status quo that keeps the businesses open," he said.

One problem is that LIPA's budget has limited room to cut.

"There's not a lot of fat sitting in that budget," Van Nostrand said. "They've taken that out. What are they going to cut? They are going to cut bones."