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December 30, 2010

 

DiNapoli: LIPA Storm Costs 80 Percent Over Budget on Average Over Nine Years



The Long Island Power Authority overspent its budget on storm costs by an average of 80 percent since 2001, with this year’s storm costs exceeding budgeted expenses by 640 percent, according to a report released today by State Comptroller Thomas P. DiNapoli. DiNapoli noted the trend of overspending suggests LIPA needs to improve its methodology for budgeting its storm costs to effectively balance storm preparedness with prudent spending.

“Predicting the weather is not an exact science,” DiNapoli said. “And neither is predicting clean up and restoration costs. But LIPA needs more realistic assessments of storm costs in its annual budgets. Cost overruns averaging 80 percent over nine years are a clear indication that LIPA’s methodology for determining storm costs is flawed and needs improvement. Long Islanders already pay some of the highest utility costs in the nation.  LIPA should do everything it can to minimize costs while maintaining response time.”

Sen. Charles Fuschillo and other Long Island legislators asked the Comptroller’s office to examine costs associated with the 2010 hurricane. DiNapoli’s report reviewed LIPA’s response in preparing for Hurricane Earl earlier this year.

The review found that while LIPA appears to have adhered to established storm protocols in response to Hurricane Earl, there are opportunities to improve the authority’s policies and procedures by exploring alternatives to committing to out-of-area crews so far in advance of a storm, potentially saving millions of dollars in pre-storm staging costs.  

DiNapoli’s review of budgeted and actual storm cost expenses found LIPA’s 2010 storm costs are estimated to exceed its budgeted amount by 640 percent. The authority’s costs are estimated to total $200 million, while the authority budgeted just $27 million for this expense.

DiNapoli’s analysis also found that since 2006, when LIPA implemented its current policy to pre-deploy repair crews to decrease restoration time, LIPA’s storm costs increased significantly from previous years while the amount the authority budgeted for such costs remained far below actual expenses.  For example, in 2006 LIPA budgeted $15 million for storm costs while $39.7 million was actually spent on power restoration and clean up. Similarly, in 2008 and 2009 LIPA budgeted $24 million and $30 million respectively while storm costs totaled $46.7 million and $50.6 million respectively.

DiNapoli recommends LIPA provide a detailed accounting and justification of actual costs incurred once these costs are known and finalized. In addition, DiNapoli recommends LIPA improve the methodologies used to establish storm cost budgets so they more effectively balance the need for a rapid and aggressive storm response with the need to contain costs ultimately borne by ratepayers.        

To view DiNapoli’s report, visit here.


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