STATE OF NEW YORK
PUBLIC SERVICE COMMISSION

CASE 01-E-.0965 —  Proceeding on Motion of the Commission as to the Rates, Charges, Rules, and Regulations of Village of Freeport for Electric Service.

JOINT PROPOSAL

Parties:

This Joint Proposal is entered into on the 30th day of November, 2001 by and between the Staff of the New York State Department of Public Service (Staff) and the Village of Freeport (Freeport or the Village), hereinafter collectively referred to as the Parties, or individually as the Party.

Background:

On July 12, 2001, Freeport filed with the Commission proposed tariff leaves for P.S.C. No. 8, containing provisions and rates designed to produce an estimated total annual revenue increase of $1,470,703. Under the proposed revisions, the rate increase would be recovered equally from customers in all rate classes and result in an overall increase of 7.67%, based upon the forecast rate year ending February 28, 2002. Newspaper publication of notice of the proposed tariff leaves was made. No comments were received as a result of the publication. The Department of Public Service held an informational session on November 13, 2001 to discuss the Village’s rate increase request and its efforts to construct new generating facilities at the Village’s Power Plant No.2.

The Parties notified Administrative Law Judge (AU) Rafael Epstein of the pending negotiations. AU Epstein directed that Freeport send copies of a Notice of Impending Negotiations (Notice) to the New York State Consumer Protection Board and to all individuals and entities who participated in the New York State Department of Environmental Conservation’s public hearing held on October 22, 2001 on the proposed modifications to Freeport’s Title V air pollution control permit for Power Plant No. 2. Freeport sent a copy of the Notice to these potentially interested parties to invite them to participate in negotiation sessions for the purpose of developing a joint proposal to resolve issues raised in Case Ol-E-0965. Staff, the Village, and three Village residents participated in the negotiation session via telephone conference on November 21, 2001. The three residents, Mr. Vincent Greco, Mr. Francis Cooper, and Mr. Stewart Liker expressed opposition to the rate increase at this time. Mr. Liker indicated that he would consider becoming an intervenor in the rate case, but to date has not.

As a result of this conference, the Parties have entered into the following agreement:

Rate Year:

1.       The Rate Year shall commence March 1, 2002. Revenue Requirement:

2. The Parties agree that a revenue requirement increase in base rates, net of Fuel Adjustment Clause (FAC) revenues, of $1,470,703 or 7.67% is justified. In the interests of ameliorating the rate impact to the ratepayers the Parties agree to a revenue requirement increase in base rates, net of FAC revenues, of $1,385,100 or 7.1%. The Village shall file changes to its tariffs to recover that amount.

3. The Parties agree that in the event of development of new generation in the Village any capacity and fixed operation and maintenance payments received by the Village shall be utilized to offset costs incurred to develop such generation, including debt or related expenses.

Rate Design:

4. The rate increase shall be recovered by a 7.1% across the board, pro rata increase in base rates to all customer classes.

Tariff Revisions:

5. Freeport shall file tariff revisions to the FAC to update it to reflect that the New York Independent System Operator (NYISO) has superseded the New York Power Pool and to reflect that the Long Island Power Authority (LIPA) has replaced Long Island Lighting Company (LILCO). Additionally, Freeport shall file tariff revisions to clarify that the FAC shall include NYISO charges including revisions thereto.

Subsequent Rate-Case Filings:

6. Freeport shall not file another request for an electric rate increase, prior to:

a)       Commission approval of this Joint Proposal, in whole or in part;

b)       Execution dates of development, interconnection and purchase power agreements for the new generation planned at, and in the vicinity of~, Power Plant No. 2;

c)       Its ability to provide in its request for an electric rate increase, details of the impact of the proposed new generating facility and associated costs and/or income; and

d)       April 1, 2002.

7.  In any application for a rate change that the Village files in the future, it shall include in the application an analysis of price elasticity and econometric modeling, including an evaluation of its electric sales forecast, of the effect of inflation, and of other regional economic variables.

8.  The Parties agree that in any future rate case, Staffs review of Freeport’s expenses and any determinations Staff has made in Case Ol-E-0965 are subject to further review including, but not limited to, Operation and Maintenance costs (O&M). Staff reserves the right to review and propose adjustments to the Commission to such expenses to reflect costs related to any facility, operating and maintenance changes, and related issues in any subsequent case.

9.  Freeport shall conduct a depreciation study of Freeport Electric’s capital assets within six months of filing a future rate case. The depreciation study shall result in up-to-date depreciation schedules for all capital assets, including those assets that may be retired.

Low-Income Program — Customer Rate:

10.       The Parties recognize that the cost of electricity represents a larger proportion of available income for the low-income population in Freeport’s service territory and that the Village receives direct payment for approximately thirteen customers. The Parties agree that a reduced rate for these customers is appropriate, specifically, a $2.00 discount from the otherwise applicable monthly customer charge. Freeport shall coordinate with the New York State Department of Social Services to determine the size of the eligible population for this special rate and inform that agency of the existence of the Village’s low-income program for vouchered customers. Freeport also agrees to continue its practice of aggressively assisting low-income customers in seeking additional assistance available from the New York State Department of Social Services’ Home Energy Assistance Program (REAP), local community, and house of worship-based outreach programs.

Integrated Least-Cost Planning:

11. Freeport shall engage in integrated least-cost planning and incorporate the results in its decision-making. Supply/demand options considered by the Village shall include installing new generating capacity, improving the heat rate of existing units, purchasing power from outside supply sources, and offering demand-side management (DSM) programs and load-shape-affecting electric rates. DSM programs to be implemented shall include the three proposed DSM pilot projects. As discussed in the testimony and Information Request responses of Mr. Hubert M. Bianco and of Mr. George L. Fitzpatrick, these projects are: a) a redesigned large commercial and industrial energy cooperative program, with participation incentives; b) a Distributed Generation (DG) program, in which Freeport Electric pays private owners for use of their emergency generation, when necessary; and c) a direct load control program for residential air conditioners, in cooperation with, or in parallel with, the “LIPA Edge” program of the Long Island Power Authority. To aid in selecting least-cost choices from among the above, Freeport will compute and maintain ratios for each supply/demand option of likely megawatts (MW) achieved (of capacity increase or demand reduction) per dollar of program expenditure.

Dispute Resolution:

12. The Parties shall first attempt to resolve informally any disagreement over the interpretation of this Joint Proposal or the implementation of any of its provisions, If the Parties cannot resolve a disagreement, any Party may petition the Commission for relief on the subject matter of the dispute.

Commission Authority:

13. Nothing in this Joint Proposal shall be construed to limit the Commission’s authority to change Freeport’s rates for electric service, should it determine, in accordance with the provisions of the Public Service Law, that the rates are in excess of reasonable rates for Freeport’s electric service.