What the PSEG Long Island Rate Hike and Project Funding Restructuring Means For the Cost of Solar in Long Island
Long Island residences and businesses are always asking “what does solar cost in Long Island and is it worth it to go solar today?”
A major component to the first part of the question as to cost of solar will depend on the size and scope of the project. The second portion of the question as to worth while has a lot to do with utility rates and their expected annual increases.
According to an article written by Mark Harrington in the Daily News, PSEG is refinancing $2.5 billion dollars in debt and will concurrently fund improvement projects from customer’s monthly bills rather then depending on debt.
This measure allows the utility to have more cash on hand to more effectively operate but does not in any way negate the next 3 years of annual increases of 1.5% in 2016, 3.8% for each year to follow until 2018. In total, PSEG will amass $127 million dollars in new revenue from the debt refinancing and $387 million in new revenue from rate hikes. For residential solar customers, this makes the return on investment when evaluating the cost of a solar system in Long Island a very attractive prospect. By installing solar in Long Island, customers will be able to avoid the financial burden of electricity rate hikes and the uncertainty which comes along with depending upon an incumbent utility. In total, rates will increase by 9% over the next 3 years. For many hard working Long Islanders who are currently paying some of the highest property taxes in the country, this may be a hard pill to swallow.
The net result of all of these increases makes the cost of solar in Long Island lower from an ROI standpoint
This also makes solar more attractive
As potential necessary measure for monthly cost control. In many cases, utility rate increases don’t necessarily go to the direct benefit of the rate payers being served.
Over the next 3 years, a large portion of PSEG’s new revenue will be allocated as such:
- $50 Million a year payment to fund PESG employee pensions and benefits plans
- $68.6 million three- year increase in PSEG’s Long Island management fee
- $84 million over the next 3 years going toward increased annual management fees
PSEG claims that collecting funds from rate payers on a monthly basis will help fund increased operating expenses.
In conjunction, reducing dependency on debt will further help the utility improve the grid while keeping rate hikes in control. However, no one knows what will happen to rates if there is another Super Storm comes and wipes out Long Island again. PSEG justifies a management fee increase due to a rate freeze put in place to help Super Storm Sandy victims. One question to ask is, were utility rates on schedule to increase if Sandy did not occur? From this supposition, It would be safe to suppose that utility rates are generally set to increase annually unless a crippling natural event would occur. And even if such an event were to occur, a temporary freeze would only force utilities to lump increases into subsequent years to make up for the loss from not increasing rates and demonstrated here.
Ultimately, customers who want control over imminent rising costs of electricity should take advantages of incentives in place to help adopt energy supply from renewable resources.
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