The effect of the Shoreham Settlement on Suffolk County ratepayers is among one of the more important issues taken up by the LIPA Oversight Committee in the past several months.
In simple terms, the Shoreham Settlement Agreement addressed remedies for the successfully challenged tax assessment of the Shoreham Nuclear Power Plant. Those remedies resulted in the levy of the Shoreham Settlement Surcharge on Suffolk County ratepayers.
Suffolk County ratepayers have been paying the surcharge associated with the settlement since June of 2003 – but – has LIPA been applying those payments to the related debt?
According to the Shoreham Settlement Surcharge schedule supplied by LIPA, the utility has collected approximately $272 million from 2003 through 2010. Based on LIPA’s Approved 2011 Budget, it appears that LIPA is still carrying approximately $143 million of the $146 million in Shoreham Settlement Bonds issued in 1998. LIPA issued another $325 million in Shoreham Settlement Bonds in 2000, but it is not clear based on the approved budget how much, if any, of that issue has been retired.
The Shoreham Settlement Bonds were instruments specifically issued by LIPA to fund prescribed rebates and bill credits for Suffolk and non-Suffolk ratepayers.
From the $325 million LIPA issued in 2000, LIPA invested $220 million and earned $18.3 million in interest – but the interest was not used to pay-down the Suffolk County Shoreham Settlement debt, as it should have been under the original agreement. Instead, according to LIPA, the $18.3 million was diverted for payments to Nassau County.
The fallout from this is not only the subject of ongoing litigation between the Suffolk County Legislature and LIPA, but also being investigated by the Suffolk County Comptroller. The problem in fully resolving the matter is compounded by a lack of transparency and accountability on the part of LIPA.
Even with some of the material the Oversight Committee has secured from LIPA, it is difficult to determine the exact status of the Shoreham Settlement Surcharge from a historical perspective. Anticipating LIPA’s administration of the surcharge going forward is even more confusing.
Regardless, it appears that Suffolk County ratepayers will overpay the principal and interest on the Shoreham Settlement Bonds by approximately $62 million over the term of the settlement (through 2029). LIPA’s surcharge schedule now extends into 2030, however, which would result in an over collection of $120 million in principal and interest.
Treatment of the Shoreham Settlement represents a serious example of the impropriety of some of LIPA’s past and ongoing practices. In fact, during the Public Hearing held by the committee on November 15th, Suffolk County Legislator John Kennedy observed that the issues raised may warrant review by New York State Attorney General.