PSC Staff: Removing Capacity Costs from LIPA Base Rates Should Be Examined in Separate Proceeding

The issue of removing capacity costs from base delivery rates at the Long Island Power Authority should be examined in a separated proceeding to be opened concerning retail choice issues at LIPA, New York PSC Staff said in testimony last month concerning LIPA's proposed three-year rate plan.

LIPA proposed to include in a Delivery Service Adjustment the costs incurred under the Power Supply Agreement (PSA) between National Grid Generation LLC and LIPA. PSA contract costs can generally be described as capacity costs that LIPA pays to National Grid to satisfy a significant portion of LIPA's On-Island capacity requirements, Staff said.

"One could argue that these [PSA capacity] costs could or should flow through LIPA's Fuel and Purchase Power Cost Adjustment charge monthly instead of being included in base delivery rates, however, because of the impact this would have on Long Island Choice program participating Energy Service Companies, we recommend that the topic of removing the PSA cost from base delivery rates be included in a separate proceeding," Staff said, noting that LIPA's service provider, PSEG Long Island, has proposed a collaborative on improving retail choice at LIPA, with Staff, in an earlier filing, preferring a more formal examination.

"We believe the topic of potentially removing the PSA from base rates should be examined in that [choice] proceeding," Staff said.

"We also recommend that the separate [choice] proceeding be initiated no later than the conclusion of the existing rate case filing," Staff said.

"In the meantime, it is reasonable to recover the differences in budgeted and actual costs of the PSA on an annual basis through the DSA mechanism," Staff said