Citing lower natural gas prices, the Long Island Power Authority will announce a 3.2 percent electric bill reduction Thursday - essentially rolling back a 3.2 percent increase instituted in January.

The cut, which LIPA says is the second largest in its 11-year history, will result in a $5.11 reduction in average monthly residential bills. It follows years of mostly incremental increases tied to higher fuel prices, formerly labeled "fuel surcharges."

The reduction, which represents a 6 percent cut in the power supply portion of bills, takes effect May 1.

It follows word from natural gas supplier National Grid that it, too, would pass along reduced gas costs to its New York customers starting in May, following declines in wholesale gas prices. The price of a therm of gas, the measure used on National Grid bills, is expected to drop to 54 cents in May from an average of $1.16 last summer, National Grid said. Overall gas bills could fall by 25 percent beginning next month.

LIPA chief executive Kevin Law said the authority had always intended to pass along savings from lower fuel prices. He said LIPA would continue to monitor fuel prices and make adjustments as necessary in coming months.

One possible offsetting factor is the implementation of a new utility tax in the New York State budget that will require LIPA to pay around $30 million in new state fees - costs recoverable through bill increases. Law said LIPA is "going to do everything we can to avoid having that tax impact on customers," including possibly cutting other programs. The $30 million would amount to a 1 percent bill increase if passed along to customers. LIPA will decide whether to pass on that cost next month.

When it announced its budget for 2009 in November, LIPA initially planned a 4.8 percent bill increase. The increase perplexed ratepayers, legislators and, ultimately, Gov. David A. Paterson because oil and natural gas prices had been declining steadily as 2008 drew to a close. LIPA ultimately responded to ratepayer outrage and a Paterson request to "sharpen your pencils" by reducing the increase to 3.2 percent. LIPA said the increase was tied to increased regulatory costs and higher maintenance fees, as well as a fuel-hedging program that anticipated higher fuel prices when they had actually decreased.

Copyright © 2009, Newsday Inc.