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With Little Public Input LIPA Adopts Budget

Following what was described as a relatively quiet period of public comment, the Long Island Power Authority (LIPA) board of directors adopted a 2001 Operating and Capital Budget plan this week. The budget, which may be found online at, allocates nearly $250 million for capital improvements, an increase of about 17% over 2000, based on a $383 million increase in revenues from 2000.

“We put a lot of notices in, we wanted people to come to the meetings, but only a few people came,” said LIPA Chairman Richard Kessel after the budget was adopted on December 12. “When you’re not raising people’s rates a lot of people don’t come.”

The 2001 budget that preserves Governor George Pataki’s 20% rate reduction, forecasting a 2.7% increase in electric sales adjusted for effects of weather, Kessel said. He added that this includes revenues budgeted at slightly over $2.5 billion based primarily on sales of electricity to residences and commercial users.

Among its expenses are over $900 million in fuel and purchased power costs; $670 million in operation and maintenance costs primarily associated with the transmission and distribution systems; and over $140 million in PILOT (payment in lieu of taxes) obligations to local governments and school districts. Additionally, the company projects $210 million in depreciation and amortization and interest expenses of $365 million, an increase of $23.7 million over 2000.

Company officials say that the budget will continue to maintain low electric rates and continue the 20% Island-wide rate reduction, and call the budget one that is on “good solid ground.”

But Citizens Advisory Panel watchdog Gordian Raacke questioned salary and benefit projections. “We spent quite a bit of time going over that budget, and one of the things I want to point out is the average employee expense,” said Raacke. “LIPA plans to have 73 employees in 2001, and they budgeted $7.7 million for salaries, benefits and another amount for expenses. When you do the math that comes out to a pretty staggering amount per employee. The average employee expense would be $123,000, $105,000 for salaries and benefits, and $18,000 for expenses.”

LIPA officials note that at this point the company is composed principally of white collar workers — KeySpan handles maintenance responsibilities for Long Island power. Disputing Raacke’s contention, Kessel said, “We don’t agree with that number. To compare any of our executives to other power executives — our salaries are piddling. I make $125,000. Catacasinos made a little bit more than that.”

According to Raacke, he noted his concern at the December 5 public hearing on the proposed budget. “The only response I got was from David Warren, their outgoing CFO,” he said. “He pointed out that LIPA has a relatively small number of employees, and they’re relatively high level. They’re office employees, but it’s still difficult to understand. Eighteen thousand dollars as an expense account for the chairman is one thing, but something seems to be askew.”

Kessel also disputed contentions by Raacke that a pass along of fuel cost increases is planned. “There is no pass along at this point,” he said. “We’re not automatically passing them along, even though we’re being hit with them very hard. We’re going to leave no stone unturned to try to absorb those costs, to eliminate or limit as much as possible any increase to our customers. I’m not sure we can, but we’ll continue to try to do that over the next few months.”

Raacke’s not buying that. “By adopting the budget, which contains roughly a 10% increase for fuel purchase, they set the stage for an increase,” he said. “They adopted a budget which includes that increase, and said they’d be deciding how exactly they’re going to deal with that. In all likelihood that increase will be passed along in 2002.”

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