New York State Assemblyman Fred W. Thiele, Jr. (I, D, WF-Sag Harbor) today stated that he was encouraged by the report of the Long Island Office of the Department of Public Service (DPS) recommending the slashing of the proposed $221 million, 3 year rate hike to $47.8 million. The utility had requested rate hikes of nearly 4% a year for the next three years. The DPS report recommends that the increases be trimmed to 0.6% in 2016, 0.5% in 2017, and 1.2% in 2018. The rate request affects the roughly 50% of the monthly utility bill called the “delivery charge.” The other 50% is for fuel.

Among the reductions recommended by DPS are $4.44 million in proposed advertising spending, $4.8 million from smart-meter computer and staffing expenses, $19.3 million from a proposed tree-trimming budget and $6.2 million for pole inspections over the three years. The department also indicated that the utilities may have boosted their inflation expense by more than $17.6 million and that lower interest rates tied to the refinancing of old LIPA debt can bring greater savings -- $109 million than LIPA had previously forecast.

DPS also found the utilities had undercut its three-year revenue forecast by $29.6 million. DPS is also recommending that LIPA alter the way it accounts for depreciation on its books in a way that will allow the authority to pay off about $2 billion of remaining Shoreham debt by 2025 instead of a planned 2032.

Savings from capital expenditures, including new state energy initiatives, would also allow the utilities to save $8.1 million more than planned. DPS also found double counting of some expenses, including a one-time employee bonus that results in a $2.1 million cost reduction, and a double-counted Nine-Mile Point decommissioning cost, saving $3.39 million.

The department also found that funding for pension and other post-employment benefits was insufficient during the rate plan and is recommending that it be increased by $12.4 million in 2017 and $25.4 million in 2018 (2016 spending for the costs would decrease by $88,000). The department is also taking issue with the way PSEG is seeking to implement the increase, through a three-step hike in the fixed service charge. The utilities propose increasing the charge from $10.80 now to around $20 by 2018 for most customers. Instead, DPS is recommending the increase be built into the overall delivery charge.

Thiele stated, “From the outset, I have been impressed by the professionalism of and expertise of DPS Long Island Director Julia Bovey and her staff. She has shown a great willingness to listen to the concerns of Long Islanders. This report reflects that. Of course, my concern remains that under the so-called LIPA Reform Act, these are only recommendations. The recommendations should be binding upon PSEG-LI. Instead, they are only recommendations with the final decision being left to the LIPA Board. I would hope that PSEG-LI and LIPA would accept these recommendations in the long term interest of the region’s economic future.”

Thiele added, “When the Governor signed the LIPA Reform Act in the summer of 2013, he stated: ‘You have to operate the utility better. LIPA’s answer to everything is more money. We don’t have more money. You can’t keep putting your hand in the pocket of the ratepayers. That’s not the answer. The answer is, use the money you have better.’ I think that the recommendations of DPS are consistent with the Governor’s intent for LIPA.”