State public service department recommends reducing PSEG requested rate hike by 26 percent

The state Department of Public Service has recommended a $325 million revenue increase over three years for PSEG-LI, according to a report released by the state late yesterday.

If adopted, average residential customers on Long Island will see electric costs increase by 0.8 percent in 2016, 2.1 percent in 2017 and 2.1 percent in 2018, according to the state. The recommended rate increase is 26 percent lower than the increase sought by PSEG-LI, according to the report.

In January, the utility filed a rate increase request seeking a cumulative revenue increase of $441 million over the next three years. Its request drew broad opposition from ratepayer advocates, elected officials and various municipalities.

The matter now comes before the Long Island Power Authority’s board of trustees, which by law has the sole power to set electric rates on Long Island.

The LIPA Reform Act of 2013, enacted in the aftermath of Superstorm Sandy, which caused widespread and prolonged power outages across Long Island and prompted a fierce public and political backlash against LIPA, gave PSEG-LI authority over the management of the operation and maintenance of Long Island’s utility system. It froze electric rates for three years and for the first time required state public service department review of proposed electric rate increases.

But the act left the authority to approve rate requests with the LIPA board of trustees.

That’s why the law “has no real teeth,” according to First District Assemblyman Fred Thiele (I-Sag Harbor) who voted against the act. Thiele, along with the Town of Brookhaven, has pushed for the Office of the State Comptroller to have an oversight role in the rate-setting process. The Department of Public Service yesterday rejected that idea, stating that OSC review is not required by the LIPA Reform Act.

Thiele has sponsored legislation that would require the election of the LIPA Board of Trustees, which is currently an appointed board, implement oversight by the state comptroller and attorney general, and vest Public Service Commission with “real regulatory authority over LIPA rates.”

State Senator Ken LaValle (R-Port Jefferson) supported the reform act but in July joined the L.I. Senate delegation in opposing PSEG’s rate request and seeking an extension of the review period.

Today Thiele said he is “extremely disappointed” with the DPS recommendation and said it should be rejected.

“It is inconsistent with the governor’s pledge when the LIPA Reform Act was signed. It would be a drag on an economy that is still recovering. The recommendation should be rejected,” Thiele said.

PSEG-LI contests the legal authority of the state DPS to recommend a reduction in its revenue request at all. The utility argues that its operating agreement with LIPA, which guarantees incentive revenue increases, precludes the state from recommending changes to it. Yesterday’s public service department recommendation rejects that argument.

The state agency’s 178-page recommendation comes after eight public statement hearings during an eight-month rate request review that produced thousands of comments and letters in opposition from PSEG-LI customers.

The DPS estimated that “as a direct result of the Reform Act’s tax reforms and authorization to securitize LIPA debt, ratepayers will save approximately $720 million over the course of the next three years.”

“We will carefully evaluate the recommendation filed yesterday by the DPS,” PSEG spokesperson Jeffrey Weir said. “We pledged to our Long Island and Rockaways customers to deliver exceptional customer service and best-in-class reliability and storm response. It is our hope that the three-year rate plan provides the resources necessary to deliver on our promises.”