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Cuomo Calls For LIPA Privatization; Local Lawmakers Suggest A Publicly-Owned Utility

Publication: The Southampton Press
By Shaye Weaver   Feb 5, 2013 10:39 AM
Feb 5, 2013 3:42 PM

The Long Island Power Authority has long been criticized by many for high rates and poor customer service, but when Hurricane Sandy hit at the end October and left nearly one million LIPA customers in the dark, the public’s anger came to a boil over the utility’s perceived slow response in getting the power back on.

Finding LIPA’s post-hurricane service inadequate, Governor Andrew Cuomo called for the abolishment of LIPA in his State of the State Address on January 9, and said that privatization of the utility could be around the corner.

By issuing bonds to pay off more than half of LIPA’s debts and selling its distribution and transmission system, the state would relinquish LIPA to a utility company and rely on the State Public Service Commission, which regulates electric, gas, steam, telecommunications, and water utilities, to ensure that rates are justified, plans are in place for storm response, and public policies are applied consistently.

“We want to privatize the Long Island service, which will be regulated by a new and empowered Public Service Commission that will happen simultaneously,” the governor said in his speech. “And we want to do it in a way that protects the ratepayers, and freezes the rate for a period of years.”

Lawmakers, both locally and across the state, say that LIPA should instead be made into a publicly owned company, as it was originally intended to be—a government-managed and operated utility for the people. Currently, LIPA operates as part public and part private—it is a state agency that oversees the operation of Long Island’s electric system and contracts London-based National Grid to operate and repair its transmission system.

“LIPA is a crazy hybrid of a politically controlled, public authority-managed company whose actual work is done by the private sector,” said State Assemblyman Fred W. Thiele Jr. of Sag Harbor. “I don’t disagree that LIPA, how it is currently, is a failure. I just think that, basically, saying, ‘LIPA’s a failure, let’s sell it back to a private company and be done with it’—that’s how we got into this mess to begin with.”

In 1985, the Long Island Power Act was enacted to acquire the Long Island Lighting Company’s assets and securities after the company’s plans to operate a nuclear power plant in Shoreham were canceled. The plant was built, racking up more than $6 billion in debt, but was never fully operational, thanks in large part to opposition from Long Island residents.

According to State Senator Kenneth P. LaValle, who supported the Long Island Power Act, ratepayers had already been disenchanted with LILCO’s response to Hurricane Gloria, which hit Long Island on September 27, 1985. Power was not fully restored until October 8.

“The final nail in the coffin was Hurricane Gloria,” he said. “People were furious. Isn’t it ironic that we went from a private utility to a public utility over a hurricane, and now we’re suggesting we go from a public utility to a private utility [over a hurricane]?”

The Long Island Power Authority was created in 1986 by the state, and later acquired LILCO’s transmission and distribution system in May 1998.

When LIPA bought out LILCO, its trustees were not elected by the public—even though the legislation creating it called for public elections—because LIPA was a state agency, much like the Metropolitan Transportation Authority. Instead, trustees were appointed by the governor, and a private company was hired to do the footwork.

“I always felt that when the LIPA legislation was passed, it would be the people’s utility—that instead of paying dividends in their rates to shareholders, it would be able to take that money and reduce rates,” Mr. LaValle said. “It’s never quite been the people’s utility, though it’s always been my mantra and what I felt should have existed.”

Service hasn’t gotten any better either, according to Mr. Thiele, who said that National Grid, previously KeySpan, has only offered poor service to Long Islanders since it contracted with LIPA in 1998.

The agreement between LIPA and National Grid will end on December 31 of this year. LIPA recently signed a new 10-year, $3.9 billion contract with PSEG Long Island LLC. to replace the National Grid agreement.

After electric companies struggled to get the lights back on after Sandy this fall, Mr. Cuomo appointed the Moreland Commission to analyze LIPA’s effectiveness, and in a January 7 report the commission explored three solutions—privatization, full public ownership and operation, and public ownership and operation of the system by the New York Power Authority—and ultimately recommended privatizing the utility.

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This comment has been removed because it is a duplicate, off-topic or contains inappropriate content.
By LipaOversight (1), on Feb 8, 13 12:24 PM
y eliminating LIPA as it currently exists and forming a Full Service Municipal Utility versus the Private option would offer the benefit of storm costs being paid for by FEMA as opposed to the ratepayer such as the Billion dollars for Sandy, the utility’s debt would be financed at lower interest rates, there is no profit layer and no employee bonuses.
By LipaOversight (1), on Feb 8, 13 12:25 PM
Are you crazy? The experiment of Lipa is a bust in every way. Thank God we have a governor that is intelligent to figure that out. The local politician doesn't want to lose LIPA because they will have one less place to employ their relatives.
By chief1 (1267), southampton on Feb 8, 13 3:32 PM
And "market based compensation" could turn 3 million dollar salaries, into 8 million dollar salaries.

Do you like $0.18 Kw/H rates, or would you prefer $0.27?
By Mr. Z (6115), North Sea on Feb 8, 13 10:10 PM
Lol you are really a funny guy. What does the goverment get involved with that ever saves money over private enterprises.? We have the highest electric bills anywhere other than Hawaii. Not to mention the service is the worst in the country. The equipment has not been updated in decades. The electrical grid is from the 60's, because the state robbed the register of Lipa.
By chief1 (1267), southampton on Feb 9, 13 11:06 AM
Should LIPA be privatized, that means a loss of tax breaks, and subsidies which are not due a private corporation. Also, most of the reason the equipment is so antiquated has been poor leadership, which comes from the private sector (DUH.), and the massive Shoreham debt which has been repeatedly restructured to benefit financial institutions, their calculus copulae, and their hubris.

For someone who calls me a "pea brain", I find it rather humorous you don't even know how to "Reply" to ...more
By Mr. Z (6115), North Sea on Feb 10, 13 6:08 PM
It's the private sectors fault that LIPA has old power lines? The poor leadership comes from a over weight political hack who talked politicians into Lilco going to a govt entity. By the way do you have an example of how govt runs something than the private sector? Didn't think so
By chief1 (1267), southampton on Feb 10, 13 9:17 PM
Was LILCO private?

Seems the answer to that is YES.

Considering the parallels between LILCO's failure with Shoreham, and their failure after Gloria, it doesn't seem that government is the problem.

People are.
Feb 11, 13 7:32 AM appended by Mr. Z
See LILCO v. Barbash
By Mr. Z (6115), North Sea on Feb 11, 13 7:32 AM
The U.S. government is wasting billions of dollars each year paying contractors to do work that could be done for nearly half the price by federal employees...Unlike other studies that compared the salaries of federal employees to their private sector counterparts, POGO's analysis compared those salaries and benefits to what contractors actually billed the federal government for comparable services.

Of the 35 job classifications that POGO studied, contractor billing rates were on average ...more
By witch hazel (187), tatooine on Feb 11, 13 10:18 AM
I agree with MR Z, if you think making LIPA privatized will be cheaper you are gravely mistaken. I was watching the news the other day and I believe it was the governor who said if LIPA was made private they would put a rate price freeze on them for the first 5 yrs...... WHAT do you thing will happen after those 5 yrs, you got it $0.28 kw/h or more....
By tookatz (75), westhampton beach on Feb 11, 13 8:49 AM
They will come up with some lame excuse like LIPA never replaced any lines and it needs to be done so we have no choice but to rase ur rates SRY.. ,
By tookatz (75), westhampton beach on Feb 11, 13 8:56 AM
This comment has been removed because it is a duplicate, off-topic or contains inappropriate content.
By Mr. Z (6115), North Sea on Feb 11, 13 9:20 AM
Where is Richie Kessel now? LIPA was nothing but a way for conning Long Islanders. Everyone made money at the expense of the rate payers. Biggest waste of time and money. At least LILCO had to answer to shareholders.
By The Real World (162), southampton on Feb 11, 13 9:36 AM
Apparently out of the public spotlight after doing some great work to start back in the '90's, but then drank too much of the Hubris flavored Kool-Aid.

He took over the NYPA in 2008, and then promptly proceeded "to remove or eliminate most of the positions that provided oversight of the Executive Offices. Throughout his tenure, and during a hiring freeze for state agencies, Kessel installed friends, neighbors, and political allies into positions throughout the Authority. Often, these positions ...more
By Mr. Z (6115), North Sea on Feb 11, 13 10:15 AM
OK, then let's put it this way.

The three main goals of the LI Power Act of 1985 were to:

A. Not allow the Long Island Lighting Company to operate the Shoreham nuclear power plant or any of the upwards of ten other plants they proposed, including Lloyd Harbor. And, to prohibit the construction or operation of any such plant by the newly formed LIPA.

B. Encouraging development of cleaner, safer, and less toxic forms of energy including wind, and solar energy.

C. ...more
By Mr. Z (6115), North Sea on Feb 11, 13 9:55 AM
Privatization = increased rates
By witch hazel (187), tatooine on Feb 11, 13 10:14 AM
Privatization without fair market competition equals higher rates. privatization with fair market competition is infinitely superior to being GVT managed. In this case lipa has no real competitors and I am not sure if this makes sense. As a Cuomo supporter I can only hope he has been given the proper advice that has led him to this conclusion.
By razza5350 (1521), East Hampton on Feb 15, 13 3:22 PM
Did someone actually mention pogo? The left wing funded, public union supported lie fund?
Why are prisons becoming privatized if the public sector is so efficient? Anyone who thinks that Lipa is doing a great job never has to call them. Look at the job they did during the hurricane. DISGRACEFUL Guess who they mostly called for help? Private utility subcontractors who were mostly non union, more organized, and less money than the unionized LIPA workers. By the way Mr Z the real world experts ...more
By chief1 (1267), southampton on Feb 11, 13 3:04 PM
1. Kessel was not elected by the proposed method, which never materialized.
2. Kessler did manage to get rate freezes, and even rate cuts implemented. Also, he got Shoreham decommissioned in record time. Pretty much the only useful things he accomplished in his tenure, but credit where credit is due even for a activist posing as a consumer advocate with a Master's in political science.
3. It didn't stop him from being politically appointed to head NYPA (note above posts).
4. I never ...more
Feb 11, 13 4:12 PM appended by Mr. Z
And, I thought POGO did a good job with their piece called "Dangerous Liasions", but you're the kind of person who probably never read it because of it's progressive nature, and just labels things without even bothering to inform oneself.
By Mr. Z (6115), North Sea on Feb 11, 13 4:12 PM
LIPA it's apears, has done a better job restoring electric than did municipalities and The State in cleaning snow off the streets. Hey Andrew Cuomo, you knew the snow storm was coming, how do you not get Plows ready?
By kpjc (145), east quogue on Feb 11, 13 10:23 PM
I've seen alot of winters, and my fair share of "lake effect snow". This came on just before rush hour, very few people went home early or prepared to do so, packed down the first two hours worth of flake/sleet that fell from the sky, people didn't stay off the roads, hundreds of vehicles were abandoned, plows were getting stuck, and it was the kind of snow you really need a payloader for.

Exactly who wasn't prepared, or acted properly?

Feb 12, 13 6:42 PM appended by Mr. Z
And, you should have seen 454, or the Sunrise on Sunday. Snow pack was easily three, or four inches thick because a bunch of dopes just had to be out on the roads. I spent some years in a PA city, and when something like this was on the way people were already home, not on the road, and there were occasions where we just shut down the city for a day, or two. But, apparently people here are smarter...
By Mr. Z (6115), North Sea on Feb 12, 13 6:42 PM
A NON UNION private company would be an improvement!
By bigfresh (1177), north sea on Feb 15, 13 9:27 PM
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