How LIPA actually sources the electricity
"Default supply" sounds passive. It is not. LIPA runs a structured procurement to lock in wholesale energy and capacity for the customers who have not chosen an ESCO. The result lands on your bill as one line.
Wholesale procurement
LIPA buys energy in NYISO Zone K and contracts capacity through long-term and short-term hedges. The blend smooths some month-to-month spot volatility but cannot hide a structural Zone K premium.
Monthly pass-through
The blended wholesale cost is converted to ¢/kWh and posted as the Power Supply Charges line on the next residential bill. PSEG LI passes it through with no mark-up; it does not earn a margin on supply.
Merchant Function Charge
A small additional supply-side line that pays for LIPA's procurement staff, bad-debt provisions and the working capital they tie up while buying power on your behalf. Tariff-set, not market-set.
ESCO override (if you choose one)
If you sign with an ESCO, that supplier's price replaces the LIPA-procured supply line. The Merchant Function Charge usually goes away too. Delivery, basic service, riders and taxes stay identical.
Why Long Island supply prices run a structural premium
Long Island sits in NYISO Zone K, an islanded load pocket with limited import transmission capacity. Even when upstate New York has cheap power, Zone K often clears at a premium because not enough megawatts can physically reach the island.
- Transmission constraints. The Y49 and Y50 cables under Long Island Sound are the only firm bulk paths from the rest of NYISO. When they are at capacity, Zone K dispatches local generation — which tends to be older and more expensive.
- Summer-peak dependence. Zone K's load is dominated by AC. The annual peak is a few hours on a humid August afternoon, exactly when wholesale prices spike everywhere. That peak shapes the capacity prices LIPA must buy.
- Capacity reserve margin. NYISO requires Zone K to maintain a higher reserve margin than the statewide average because of its islanded nature. That extra capacity is paid for by LI customers in the supply line.
- The LIPA offset. Because LIPA is a public authority issuing tax-exempt municipal bonds, the cost-of-capital line on the bill is several cents per kWh below what a private investor-owned utility would charge. Without it, LI bills would be structurally worst-in-state.
Sources: NYISO Zone K congestion data; LIPA tariff filings; EIA Electric Power Monthly state averages.
Three ways to buy electricity on Long Island
Default flat-rate supply, the time-of-day variant or an ESCO. Pick the one that fits your load shape, not the one with the lowest headline price.
| Path | Price structure | Volatility | Best for |
|---|---|---|---|
| Default supply (LIPA SC-1) | One ¢/kWh that changes every month with the LIPA-procured wholesale blend | Medium | Households with steady all-day consumption; default for new accounts. |
| Time-of-Day Rate 180 | Three ¢/kWh bands (peak, shoulder, off-peak) by hour of day | Medium-high during summer | EV owners, pool-pump households, heat-pump homes with smart thermostats, anyone with overnight flexibility. |
| ESCO (competitive supplier) | Fixed-rate, variable-rate or green-tagged ¢/kWh contracts | Depends on contract | Customers who want a locked price or a renewable-content contract and will compare offers carefully. |
How to benchmark an ESCO offer. Take your last 12 months of PSEG LI bills, add up the supply ¢/kWh per month, divide by 12 to get a default-rate annual average. Compare that to the ESCO's all-in price (including any monthly customer charge, teaser-period reset and green-content premium). An ESCO offer is "cheaper" only if its 12-month projected total is below default. Be especially careful of variable-rate plans with low teaser pricing that reset above market by month four.
Where to find the current PSEG LI supply rate
Source 1
Your most recent PSEG LI bill
The "Power Supply Charges" line on page 1 shows the ¢/kWh applied to last month's usage. The rate changes each cycle; this is the actual rate you paid.
Source 2
My Account on psegliny.com
Logged-in customers can see historical supply rates back several years; useful for spotting summer-to-winter swings before signing an ESCO.
Source 3
LIPA tariff filings
For the published Service Class definitions and the formal supply-rate calculation, see the current LIPA tariff book at lipower.org.
Frequently asked questions
Does PSEG Long Island make money on supply?
Why does the supply rate change every month?
Is Time-of-Day Rate 180 cheaper than default?
Can I switch to an ESCO and back to default?
What about the gas supply rate on Long Island?
Related on Long Island electricity
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Same playbook, different utility. Pick another deregulated state to compare utilities, suppliers and switching rules.
