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October 3, 2012

 

DiNapoli: LIPA Customers Pay More For Less

Reform Efforts Should Put Ratepayers First

Long Island Power Authority (LIPA) ratepayers paid an average of $463 more per year for electricity in 2011 than they did in 2001, according to a report released today by State Comptroller Thomas P. DiNapoli. The report is the latest in a series by DiNapoli on public authorities.

“LIPA was established to control electricity costs on Long Island, but residents’ bills have consistently outpaced those of other utilities in New York State, the Northeast and the United States,” DiNapoli said. “A review of LIPA's rate growth, high-paid executives and heavy debt load demonstrate a change is needed. Current efforts underway to improve results for LIPA's ratepayers, such as the Public Service Commission’s review and oversight, are much needed and long overdue.”

LIPA’s rate includes two major components: the base rate and the power supply charge. According to DiNapoli’s review of information reported by the Authority, LIPA’s base rate has remained stable or decreased since 2001 while the power supply charge has fluctuated, increasing average customer bills by up to $52 per month.

DiNapoli’s review found that storm costs have surpassed the budgeted amounts in each of the past ten years. From 2001 to 2009, LIPA’s annual storm costs were an average of 80 percent over budget. In 2011, such costs were an estimated 385 percent over budget.

Nearly half of LIPA’s staff – including 10 vice presidents and 32 directors – earn $100,000 a year or more.

LIPA was established in 1986 by the state Legislature to control electricity costs within the Long Island Lighting Company’s (LILCO) service area. LIPA supplies electricity to 1.1 million customers on Long Island and the Far Rockaways in Queens.

For the fiscal year ended Dec. 31, 2011, LIPA reported:

  • Its expenditures totaled $3.8 billion. Total revenues reported were $3.9 billion. LIPA’s major costs were for fuel, purchased power, and operations and maintenance. The primary source of LIPA’s revenues is electric sales, with small amounts of non-operating revenue from other sources such as investments and grants.
  • Its outstanding debt totaled more than $6.8 billion. Annual debt service costs are expected to consume 16 percent of the Authority’s estimated revenues for the fiscal year ending Dec. 31, 2012. In 1998, LIPA issued $6.7 billion in bonds to buy LILCO’s transmission and distribution system and to refinance portions of LILCO’s outstanding debt, including debt from Shoreham. It is unclear how much of the debt from Shoreham remains.
  • It has 279 active procurement contracts totaling nearly $15 billion. Of those, 205 were entered into through a competitive bidding process, with a total value of $9.4 billion. However, contracts representing nearly 35 percent of the total value of LIPA’s procurements (more than $5.2 billion) were awarded through a noncompetitive process, nearly half of which reflects the 2007 Master Services Agreement with National Grid.

Efforts to improve LIPA’s performance continue. Specific reform initiatives include recommendations that may result from the investigation by the State Inspector General and new audits by the Public Service Commission, as well as rigorous contract management by LIPA to ensure PSEG Long Island's compliance with all its requirements, as called for by the Comptroller. These measures should serve to increase the accountability, transparency, and efficiency of LIPA for ratepayers in the future.

The Public Authorities Accountability Act of 2005 and the Public Authorities Reform Act of 2009 created new reporting, disclosure and accountability requirements but public authorities continue to operate with a tremendous amount of autonomy. DiNapoli’s review of LIPA in the Public Authorities by the Numbers series is part of his office’s continued efforts to strengthen government oversight and improve public access to information on public authorities.

For a copy of the report, visit: http://osc.state.ny.us/reports/pubauth/lipa_by_the_numbers_10_2012.pdf


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