March 2002

The New York State Public Service Commission has unanimously granted the first rate increase to Freeport Electric Since a filing Over Six Years Ago

As many of you are aware from the story that appeared in Newsday on February 28th, the New York State Public Service Commission has unanimously granted the first rate increase to Freeport Electric since a filing over six years ago. This rate increase of 7.1% is effective immediately on March 1, 2002 and will be reflected in your next utility bills for electricity used and billed from March 1 on.

Based on a 650 Kwh average usage for residential customers, the 7.1% increase represents approximately $4 per summer/peak month and $3 per month in the remainder of the year. The increase for commercial customers would vary depending on their individual demand charges and their specific energy usage. However, each component of the commercial rate structure has increased by 7.1%.

The rate hike is expected to generate an additional $1.38 million in annual Utility revenue, critically needed to fund ongoing Utility operations and capital programs. Freeport Electric is proud of its century-long history of providing the most reliable and cost-effective electric service possible to its residents and businesses, but there are times when rate increases are inevitable. Even with the granting of this rate increase, Freeport Electric rates remain about half those levied by LIPA for commercial and residential ratepayers throughout Long Island.

We have tried and will continue to try everything we can to hold rates down. We have identified innovative ways to reduce our independent system operator costs, as well as energy and capacity costs. Additionally, we have aggressively negotiated contracts to reduced costs for additional capacity that would typically be purchased at the New York State Independent System Operator deficiency auction.

Like all utilities, Freeport Electric has suffered significant increases in the cost of generating and supplying electricity. The Utility has operated "in the red" for the past two years. The introduction of the New York Independent System Operator (NYISO) in 1999, a regulatory body under the aegis of the Federal Energy Regulatory Commission, resulted in a 30% increase in the cost of wholesale electricity purchased by the Utility when compared to 1998.

Freeport Electric relies on a variety of sources of electric generating capacity to serve its customers. The first source of power used is hydroelectric power supplied by NYPA (the New York Power Authority). Hydroelectric power is the most environmentally preferred and cleanest source available in the state. Freeport Electric receives that primary supply of hydroelectric purchased under a firm (guaranteed) contract from NYPA. However, the NYPA allocation does not meet all of the Village's needs, and in the past year, low water levels in the Great Lakes have forced NYPA to reduce the electricity supplied to Freeport by as much as 23%.

When Freeport Electric requires more electricity than is available from the NYPA hydroelectric power, the Utility either purchases electricity from the commercial electric market or generates electricity at its own power plants, depending on which is more cost-effective.

Even with this increase, the municipal electric system provides very cost-effective and reliable power, which has played a very significant role in the economic growth and stability of the Village. Low cost electricity is a strong asset for businesses locating in the Village's industrial park, as demonstrated by near-zero vacancy rates. Stable business operations of the Utility, with still very favorable electric rates, are critical components of the continued health of our Village's economy.

The 7.1% rate increase granted by the Public Service Commission is the result of a settlement negotiated between the Utility and PSC Staff. Freeport Electric had initially sought a 7.67 % increase in our filing that was originally submitted in July 2001. The last petitions for rate increases were made in 1995 and 1986.

Energy Tip

Leaks around windows and doors of the average home are equivalent to one open three foot by three foot window. Checking your roof, walls, floors and windows for air leaks is an excellent way to maximize savings from your heating and cooling systems. You can check for leaks by wetting your finger tips and running them around the door or window frame to feel for a draft or holding up a tissue to see if it moves. Seal the leaks between moving parts, such as a door and frame, with weather stripping. Seal leaks between non-moving parts, such as the window frame and wall, with caulking.
Superintendent Hubert M. Bianco