New York’s Utility Debt Securitization Authority issued $823.3 million in bonds to help a power provider on Long Island refund previously issued securities and make system improvements.
The authority sold the bonds in three series, including $35.7 million in federally taxable bonds and $787.7 million in tax-exempt securities. The taxable bonds are scheduled to mature on December 15, 2039 and yield 5.667%. The tax-exempt bonds are scheduled to mature between 2025 and 2051, yielding between 3.27% and 4.53%. The securities received a rating of Aaa from Moody’s Investors Service and AAA from S&P Global Ratings.
The bond proceeds will support the Long Island Power Authority’s (LIPA) refinancing programs. LIPA provides electricity to more than 1 million people in two Long Island counties, which are among the wealthiest in the United States. It contracts day-to-day operations through a public-private partnership with PSEG Long Island.
The issuance comes amid a state review examining whether LIPA should end its contract with PSEG and become a fully public utility. Supporters say such an action would reduce residential electricity prices. “We must fully commit to a new paradigm of energy management on Long Island and oppose any efforts to further privatize our energy services,” a group of progressive groups wrote in a letter to the LIPA board of trustees.
Critics of municipalization, including union officials and energy industry groups, argue that making LIPA fully public would provide worse service for the same costs. Municipalization is “usually a costly folly that rarely achieves the benefits proponents claim,” writes Wendy Hijos, New York state director for the Consumer Energy Alliance, an advocacy group that supports fossil fuel projects.
The Utility Debt Securitization Authority is responsible for LIPA’s financial reporting. The bonds are limited obligations of the authority, secured by a special charge on utility bills issued by the Long Island Power Authority. The charge is expected to be almost 2% of a residential customer’s electricity bill.
J.P. Morgan Securities LLC served as lead underwriter on the issuance.