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Annual Disclosure Report

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Annual Disclosure Report ANNUAL DISCLOSURE REPORT of the LONG ISLAND POWER AUTHORITY (FISCAL YEAR 2020) This Annual Disclosure Report does not constitute an offer to sell or solicitation of an offer to buy any securities. The information set forth herein has been furnished by the Authority and LIPA and includes information obtained from other sources, all of which are believed to be reliable. The information and expressions of opinion contained herein are subject to change without notice and nothing herein shall, under any circumstances, create any implication that there has been no change in the affairs of the Authority, LIPA, PSEG, PSEG Long Island, National Grid or Exelon since the date hereof. Such information and expressions of opinion are made for the purpose of providing information to prospective investors and are not to be used for any other purpose or relied on by any other party. This Annual Disclosure Report contains statements which, to the extent they are not recitations of historical fact, constitute “forward-looking statements.” In this respect, the words “estimate,” “project,” “anticipate,” “expect,” “intend,” “believe” and similar expressions are intended to identify forward-looking statements. A number of important factors affecting the Authority’s and LIPA’s business and financial results could cause actual results to differ materially from those stated in the forward-looking statements. References to website addresses presented herein are for informational purposes only and may be in the form of a hyperlink solely for the reader’s convenience. Unless specified otherwise, such websites and the information or links contained therein are not incorporated into, and are not part of, this Annual Disclosure Report. [Remainder of Page Intentionally left blank] TABLE OF CONTENTS Page INTRODUCTION TO THE AUTHORITY AND LIPA ................................................................................................... 1 Relationship of the Authority and LIPA ....................................................................................................................... 1 System Operation by the Authority ............................................................................................................................... 3 LIPA, PSEG Long Island and DPS ............................................................................................................................... 4 2020 FINANCIAL INFORMATION ................................................................................................................................. 4 RECENT DEVELOPMENTS ............................................................................................................................................ 5 Tropical Storm Isaias and Options Analysis ................................................................................................................. 5 Board Policy on Debt and Access to the Credit Markets .............................................................................................. 7 Impacts from the Coronavirus and COVID-19 Pandemic ............................................................................................ 8 Integrated Resource Planning and Repowering Studies .............................................................................................. 10 Suffolk County Payments in Lieu of Taxes ................................................................................................................ 10 Power Plant Property Tax Litigation ........................................................................................................................... 11 Recent Legislation ....................................................................................................................................................... 11 THE OSA ......................................................................................................................................................................... 11 DERIVATIVES AND HEDGE ACTIVITIES ................................................................................................................. 13 Commodity Hedging ................................................................................................................................................... 14 Interest Rate Hedging .................................................................................................................................................. 14 RATES AND CHARGES ................................................................................................................................................ 15 The Act and the Rate Covenant .................................................................................................................................. 15 Rate Tariffs and Adjustments ...................................................................................................................................... 15 Modifications to the Tariff .......................................................................................................................................... 16 Power Supply Charge .................................................................................................................................................. 16 PILOTs ........................................................................................................................................................................ 16 The Securitization Authority and Restructuring Charges ........................................................................................... 16 Authority to Set Electric Rates .................................................................................................................................... 17 Comparative Rates ...................................................................................................................................................... 18 BILLING AND COLLECTIONS .................................................................................................................................... 18 SECURITY AND SOURCES OF PAYMENT FOR THE BONDS ................................................................................ 18 Pledge of Trust Estate ................................................................................................................................................. 18 Payment of Revenues Pursuant to Financing Agreement ........................................................................................... 19 Funds ........................................................................................................................................................................... 19 Flow of Funds ............................................................................................................................................................. 20 Rate Covenant ............................................................................................................................................................. 20 Additional Bonds Test ................................................................................................................................................ 21 Subordinated Indebtedness; Acceleration of Subordinated Indebtedness ................................................................... 21 Other Agreements ....................................................................................................................................................... 21 LONG ISLAND POWER AUTHORITY ........................................................................................................................ 22 The Act........................................................................................................................................................................ 22 Trustees ....................................................................................................................................................................... 22 Strategic Direction by the Board ................................................................................................................................. 23 Management and Operation of the System ................................................................................................................. 23 THE SYSTEM ................................................................................................................................................................. 26 Service Area ................................................................................................................................................................ 26 The Transmission and Distribution System ................................................................................................................ 26 Capital Improvements ................................................................................................................................................. 29 Loads ........................................................................................................................................................................... 29 Power Supply .............................................................................................................................................................. 30 Cybersecurity .............................................................................................................................................................
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