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Source: Newsday

Schumer legislation would cut LIPA bills


Posted: August 27, 2009
Originally Published: August 26, 2009

The solution to LIPA's woes lies in legislation that would allow the authority to cut bills by at least 5 percent through refinancing of the authority's hefty borrowing, says Sen. Charles Schumer.

The legislation, Schumer said, would extend the Rural Electrification Act to include public utilities, including LIPA, in urban and suburban regions. It would give LIPA access to low-interest and federally backed loans of around 2 percent, down from rates of between 4 percent and 7 percent that it currently pays.

"Right now, we do it for rural ratepayers," Schumer said, adding the bill has "broad" support. "Larger public utilities should be allowed to get some help."

LIPA critics have been clamoring for a federal bailout to help the authority get out from under the debt, which limits its ability to pay for new projects and weighs heavily on customer bills.

"We're not going to get a bailout," LIPA chief Kevin Law said. "The federal government is not going to give us $7 billion."

But federally guaranteed loans and lower interest rates would have broader support, Law and Schumer said, adding it could trim $150 million to $175 million a year in finance costs.

Not all are convinced legislation is the way to go.

"If Senator Schumer puts his full efforts behind this legislation, it may have a glimmer of hope. However, if it is allowed to sit idly on a shelf, then it is doomed," said Adrienne Esposito, director of the Citizens Campaign for the Environment. "The senator should work to negotiate a lower interest rate and dispense with legislation."

LIPA's $7 billion in debt is chiefly the result of just over $4 billion from the decommissioned Shoreham nuclear power plant, a state-negotiated decision with the former Long Island Lighting Co. LIPA took over LILCO in 1998.

Said Dowling College business school Dean Matthew Cordaro, "If Schumer seriously pursues this [bill], public utilities throughout the nation will be lining up for money in total that will make the Shoreham debt look minuscule."

LIPA has continued borrowing since it took over the LILCO debt, amassing its own pile of more than $3 billion in borrowings since 1998 to fund rebuilding of the Island's electric grid and contracts for new power plants, among other things. LIPA has said it isn't likely to pay off the Shoreham portion of its debt by 2013, as previously promised.

Fifteen cents of every dollar on LIPA bills goes to service the debt. Schumer said passage of the legislation would lower a monthly bill from $150 to around $130.