December 2002

Freeport To Rebid New Generation Project at Freeport Power Plant 2: Project Implementation May Be Delayed Several Months

(Freeport, New York, December 10, 2002) - At its meeting last night, the Village of Freeport Board of Trustees rejected all prior bids for the construction of the new generation project at Power Plant 2. The determination of the Village Board was based on construction costs substantially exceeding engineering estimates, and changes in project design, schedule and circumstances.

The Village had been initially encouraged by the favorable bids received on "hard" equipment costs. However, coordination of schedule for the Village generation project and the adjacent privately developed merchant facility, coupled with an early summer operation date required in the bid documents, appeared to have contributed to the high construction cost component.

The fixed June 2003 start date stated in the original bid documents is no longer feasible due to merchant developer, PPL's withdrawal from the merchant project last month. In addition, NYS Department of Environmental Conservation has not yet issued air quality permits that are required for construction to commence. Continued engineering has refined the location of the 69kV line which will connect the PP2 site to the Village and LIPA distribution grids, and the gas transmission line which will supply the PP2 generation projects.

Mayor William Glacken affirmed the Village's belief that re-bidding the project will result in improved project economics, which are critical to maintaining favorable electric rates for Village ratepayers. "We are confident that when the Village re-bids the project, project economics will be improved. The reduced number of power generation projects currently advancing in the region should also make the bids more competitive." "Further," he added, "a revised and realistic date for commercial operations will reduce potential overtime costs." LIPA is currently working to secure a merchant vendor to replace PPL as the private developer for a generation project at the PP2 site, which will serve the LIPA Long Island market.

"The Village and Freeport Electric continue to work closely with LIPA on the development of these projects," stated Hubert Bianco, Superintendent of Electric Utilities. "LIPA has continued to assure the Village that it will provide power required so that the PP2 diesels are not required for routine operations while the replacement generation is developed at the PP2 site."