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State asks utilities to explain, modify proposed rate hikes


The state Department of Public Service is requesting explanations and modifications to LIPA and PSEG Long Island’s case for a 3-year, 4-percent rate increase.

The first technical conference on the rate request is scheduled for March 3 in Smithtown.

In a filing Tuesday, the department asked the utilities to explain the “key drivers” behind the increases, which will bring in more than $440 million in new revenue over three years, beginning in 2016. DPS has “review and recommend” authority over LIPA and the PSEG contract, but limited power to enforce its requests.

The filing asks for an explanation on the prospect of disproportionate rate impacts on customers. The “average rate impact is 4 percent but certain components may lead to above or below average rate impacts,” DPS states.

For instance, the utilities are requesting that the fixed-service portion of customer bills, which amounts to 36 cents a day for residential customers to be linked to the grid, be raised to $20 a month from a current $10.80 by 2018, an 85 percent hike. Certain businesses would pay more, while low-income customers could pay less. It also proposes consolidating rate codes (eliminating a water-heating code 380, for instance) that offered varied pricing for seasonal and daily usage, to create a “simple-to-understand flat energy charge.”

“It’s not right,” said Carmine Vasile, a Patchogue ratepayer. His rate code, he said, “was grandfathered and that means it stays. What gives them the right to change it?”

The authority also proposes to double what it charges nonresidential customers if it can’t gain access to meters for readings, to $100 from $50.

PSEG said it’s aware of the DPS requests and is preparing information to respond at the technical conference.

While agreeing that a state-mandated program called Utility 2.0 for reducing energy demand should be excluded from the rate case, the state is requesting that the utilities give consideration to certain of those programs to address peak-power shortages in certain regions.

PSEG has previously said it would issue bid requests to address peak shortages on the South Fork, Far Rockaway and Glenwood Landing. The most recent estimate for Utility 2.0 had a $345 million price tag, enough to nearly double the 4 percent rate increase if included in the rate plan.

The state is requesting a full review of a mechanism called “revenue decoupling,” as part of the rate proceedings. Decoupling allows a utility to recoup costs through a rate hike when sales fall short because of abnormal weather or green-energy programs that reduce usage.

Noting that LIPA’s revenue coupling scheme has not been subject to regulatory review that investor-owned utilities normally undergo, the department said, “It is proposed that [revenue decoupling] be added as a scope of the proceeding.”