LIPA Proposes 2008 Operating Budget

November 20, 2007

Uniondale, NY- November 20, 2007-The Long Island Power Authority (LIPA) today released its proposed 2008 Operating Budget anticipating revenues of $3.7 billion. The cost of the fuels used to generate electricity and the electricity that LIPA buys from suppliers, remain its largest single expenditure totaling 55% of the entire operating budget - and are projected to increase by 10% next year to more than $2 billion. Fuel and
purchased power costs have risen as a percentage of LIPA’s operating expense from 31% in 1999 to 55% for the proposed 2008 budget.

Despite the dramatic increases anticipated in the cost of fuel and purchased power, LIPA officials have employed a “smart management” approach in its budgeting practice in an effort to reduce operating expenditures for 2008 to help mitigate the impacts of the sharp increases in the Authority’s non-discretionary costs.

The net result is a modest increase in the Power Supply Charge back to the rate that was in effect at the beginning of 2007, which will add 2% or approximately $3 to the typical residential customer’s monthly bill -
less than the current price of one gallon of gasoline or home heating oil.

“This is an extremely tight budget,” said LIPA’s President and CEO Kevin S. Law. “We cut back in a number of ways, both large and small, to minimize the need to increase the Power Supply Charge despite the historic increases that are projected for the cost of fuel needed to produce electricity for LIPA’s customers.”

Mr. Law noted that 55% of LIPA’s budget goes for oil, gas and purchased power costs. Another 17% is spent to cover operating and maintenance costs; 16% for debt related costs; 11% on taxes and Payments in Lieu of
Taxes (PILOTS), and, contrary to public perception, less than 1% for salaries and benefits for LIPA’s employees and its professional services and general expenses.

With more than 95% of the Authority’s nearly $4 billion budget comprised of non-discretionary expenses, Law applied the scalpel to the discretionary portion of its spending plan and as a result, cut more than $8 million in spending.

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Posted by News LI Editor · Edited by Brianna - Filed Under Business