Due to an amendment in the approved New York Fiscal Year 2020 Budget, electricity customers located in the Long Island Power Authority (LIPA) territory with third party electricity supply agreements will be returned to the utility by June 1, 2019.

In the budget filed by New York Governor Andrew Cuomo’s administration, bills A. 2009 and S. 1509 eliminated the sales tax exemption on non-residential transmission and distribution of gas or electricity that is purchased from an Energy Service Company (ESCO). The approved budget effectively reinstitutes the ~4% sales tax effective June 1, 2019, and applies to sales made and services rendered on and after that date without a grandfather clause.

The exemption was originally put in place to incentivize electric and natural gas consumer supply choice and allowed suppliers to offer reduced supply rates through shared tax savings with the customer. However, now that ESCOs are established, the incentives are said to be no longer needed, pushing LIPA customers back to utility rates this summer.

That tax exemption was the basis of the supplier program, under which the supplier and end-user shared in the benefits. Without the exemption there is no opportunity for savings and the agreements with ESCO’s on Long Island will be terminated.