NYPA to Restructure Electric Rates

Freeport Electric and our customers rely heavily on the hydro-electric power supplied by the New York Power Authority (NYPA). NYPA hydro-electric power is first used to supply Village needs before other power is purchased or the Village self-generates electricity. NYPA has notified all Municipal Electric Utilities in the State that they plan to increase their hydroelectric rates. It is anticipated that the plan will call for rate increases over the next four years

Freeport Electric is watching this situation carefully. Freeport Electric is a member of the New York State Municipal Electric Utility Association (MEUA) and Superintendent Bianco is currently a Member of the MEUA Board, which has put together a team of consultants to review the rate request in detail. MEUA is planning a series of meetings with NYPA representatives to discuss and analyze the rate structure and the cost of service study and NYPA's proposal to raise rates. While the amount of the increase has not been finalized, initial indications are that it could be substantial and will affect energy and demand costs. Any increase in the hydro costs will be a direct pass through to our customers.

Power Project Progress

The power project is moving along well. The Utility has purchased the combustion turbine and generator, the transformers and the emission control equipment and stack for the Village's new generator at the Power Plant 2 site. The contractor will supply the remainder of the equipment.

Freeport Electric issued the Request for Proposals to firms interested in constructing the project. The proposals are due back shortly, and we anticipate making a recommendation to the Village Board, and approval by the Board by the end of March. Construction on the Village's unit will begin this April with substantial completion of the unit by November of this year.

Freeport Electric and LIPA have each been meeting with prospective developers to replace PPL who, in late 2002, withdrew from constructing and operating a second generator to serve LIPA customers. There are at least four new developers interested in the project. However, given the current construction schedule for the Freeport unit, it is unlikely that a developer will start construction before the Village project is complete.

Energy Tip

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