Lunch with LIPA CEO Kevin Law

Long Island Power Authority President and Chief Executive Officer Kevin Law took time out of his busy schedule running the nation’s 
second largest public utility to meet up for lunch at Tweed’s Restaurant and Buffalo Bar in Riverhead last month.

Over buffalo skewers and iced tea, Mr. Law, who is now in his third year at the helm of LIPA, a non-profit entity, discussed his efforts to promote energy efficiency, the newest developments in renewable energy sources 
and his strategies for the future.

Prior to running LIPA, Mr. Law was the Chief Deputy County Executive and General Counsel for Suffolk County. He has also held the post of Director of Real Estate for the Suffolk County Department of Law, where he administered the Pine Barrens, Open Space and Farmland Preservation and Acquisition Programs. Additionally, he was the managing 
partner of the Long Island office of law firm Nixon Peabody, where he focused on matters relating to all facets of energy, environmental, land-
use, real estate and municipal litigation.

Q: You have had quite an interesting career path, especially as it relates to preservation and the environment. How did you come to end up as the number one guy at LIPA?

A: My whole life has been about protecting the environment. I’m in a position where I can actually do things. It’s an exciting place to be. My first tour of duty with the county was as Director of Real Estate. I worked on preservation efforts for the Town of Southampton. Then on to Nixon Peabody. Then I ran the county for Steve Levy as Chief Deputy. Then Governor Spitzer asked me to become the chairman of LIPA to oversee the 15 member board. It was all public service, no compensation, and then they asked me to become the president and run it. I was hesitant initially. I thought, ‘Everybody hates LIPA, why would I want to do that?’ But then I thought, ‘LIPA is a $10 billion company, the second largest public utility in the country.’ The entire world was focused on energy and I thought it was a good opportunity for things to be shaken up. So I thought ‘I’ll do it.’ I got appointed in October 2007. I have no regrets, though people think I’m crazy.

Q: What’s different at LIPA since you’ve taken over?

A: I spent my first year, 2008, reforming, bringing the decibel level of LIPA down—you don’t see me out there holding a lot of press conferences—and on building my team. In 2009, we set the foundation for our Clean Energy program, ‘Efficiency Long Island,’ the largest energy efficiency program for any public utility in the country, the largest solar energy project in New York State; and introducing Smart Meters, which is a prelude for Smart Grid; and planning for what could be the largest off-shore wind project in the country. It’s an exciting time and a great industry to be in right now.

Q: The assumption has always been that the power company wants you to use as much energy as possible. A big bill means that the power company keeps making money, right? The fact that you are such a proponent of this new clean energy and energy-efficiency program is perplexing. So what gives there?

A: Great question. We are a public utility and a public authority. We don’t have any shareholders, we only have our customers. Unfortunately, the only place we get money is from our customers. While there’s always a focus on the bottom line to control costs, we don’t make a profit. And so, there may be some utilities out there who grow the company in terms of revenues, which mean increased profits, which would be increased dividends to shareholders.

We have a motive, in addition to the environmental benefits, of using less energy and the ability to help our customers lower their bills. We can move from the distinction of rates and bills by becoming more energy-efficient. So it’s good for the environment and it’s good for our customers with lower bills.

Why’s it good for LIPA? It’s the power plant we don’t have to build. It’s the goal of our program to reduce our peak demand for energy by about 500 megawatts, which is bigger than the size of the Port Jefferson Power Plant.

Q: Explain peak demand.

A: Peak demand is the day we’re using the most amount of energy. Typically those hot July or August days when the air conditioners and pool filters are on. Even if we only hit that peak one day a year, we need a reliable system in place to meet that demand.

Q: Because if not?

A: The lights will go out. It’s like, you don’t build a highway just to handle the Fourth of July traffic; you build a highway to handle 90 percent of the normal days. But utilities have to build and have an infrastructure in place to handle that Fourth of July day. When our peak demand is increasing, we need a new resource to meet that demand. That’s typically a new power plant. Efficiency is the power plant you don’t have to build.

Q: So, if you’re keeping all this in line, you don’t have to go out and spend billions of dollars to build another power plant?

A: Exactly. So it’s good for the environment, it’s good for customers who can lower their bills and it’s good for LIPA because we can reduce our peak demand and not have to build a new power plant.

Q: LIPA has been handing out a lot of rebates for energy efficiency. What’s that all about?

A: If we can change the behavior of our customers, then the less energy they have to use. The best way to change people’s behavior is to hand out money. To encourage or incentivize them to buy energy-efficient appliances, we offer $15 to $75 rebates. Most of our ‘Efficiency Long Island’ program is geared toward our customers for lighting, appliances, heating systems and dehumidifiers. That’s really the heart and soul of our efficiency program.

Q: Is this program government funded?

A: We get no money from the government. Even though we’re a government entity, we get 99 percent of our money from our rate base. We get a small sliver of money from cell phone companies who co-locate their facilities on our poles and wires. On every LIPA customer’s bill, you’ll see an efficiency renewable charge.

Q: So how does this rebate system work?

A: Everybody pays a couple of dollars a month into this program. We spend about $75 million a year, each year it’s going to go up. They’re [the customers] paying for it so they should use it. Everybody’s eligible. We also give solar rebates to help reduce the cost of solar. It works. We help reduce the cost and we give rebates. The goal is to give incentives to our customers to pay for what is initially an expensive outlay of money. But it’s working. Our solar programs are going gangbusters. In fact, we’re running out of money quicker than we can give it out because so many people are willing to participate now.

Q: I don’t want to get stuck on this but it seems like a backwards business model because you are encouraging customers to use less of your product. And you’re giving them the funds with which to do it.

A: We’re spending a billion dollars on this program. The most recent power plant to be built on Long Island, Caithness, in the Town of Brookhaven, cost about a billion dollars. I’d rather spend a billion dollars helping our customers lower their energy bills than spend a billion dollars on a power plant that nobody will want in their back yard, that has to be fed expensive fossil fuel and will have emissions going through the atmosphere impacting our climate. To me, it’s a no-brainer. Efficiency is our next best resource.

Q: In that vein, do you see more and more of that resource coming from solar and wind power?

A: More than any other utility in the state of New York, we are far and away the leader. We are rated in the top 10 of all utilities in the country for solar installations. And eight of the 10 are on the west coast, so we feel pretty good about that. But it’s still a drop in the bucket.

The typical solar pioneer customer has a monthly $5 bill, because they still need to be connected to the system. Everybody thinks the cost of wind and solar are free or cheaper, they’re not. Initially, they’re more expensive than the fossil fuel plans but the long-term benefits, both economic and environmental, will be there.

We’re going to continue to introduce more renewable energy into the mix. We’ve got to look at it like a 401K. You want to have diversity. You don’t want to have all your stock in technology. You want to have a mix. Fossil fuel, efficiency, solar, wind. That’s where we’re trying to head.

Q: What’s happening with senior discounts and bill pay assistance?

A: The number one concern I’ve gotten in the first two years is from senior citizens on fixed incomes. Especially as the price of fuel has gone through the roof. We’re not a social service agency and we don’t get any money from the government, so any programs that we do, like our environmental programs, everybody pays for that. We don’t have a shareholder fund we could dip into. When the Keyspan/National Grid merger took place, we got some savings out of that. We got about $200 million in savings. I put about $180 million of it toward our budget to help lower the cost of rates. But then we did a couple of other things, including, we created a $10 million low-income senior citizen fund, we’ve given a $200 credit to low-income seniors. We’re still in the middle of implementing the program. We have 31,000 applications and we’ve processed about 8,000 of them so far.

Q: Where does that 31,000 number draw from?

A: From Far Rockaway to Montauk. It’s taken longer than I would have liked, but we have to verify their income. There are people who try to pass some things by us. But it’s been well received.

Q: Tell me about Smart Meters and when and if they are going to come to the East End?

A: Meters today, all they do is measure the amount of electricity that you’re using. And we have to send meter readers out to see how much has changed. Smart meters allow for two-way communication between LIPA and the customer. For instance, we’ll know when the power’s off, you won’t have to call us. We’ll be connected, so it will be more reliable. More importantly, where the utility industry is heading; we’re going to be able to send pricing signals to the customer and we’re going to start moving to time-of-use rates. Voluntarily. As an example, you might pay ‘X’ for running your pool filter or dryer between 10 a.m. and 4 p.m., but you’d pay ‘Y’ if you did those things at night. It’s the way for us to change the behavior of our customers, allowing them to choose and monitor how much electricity they use and what they end up paying for it. We’re doing two pilot programs right now but eventually everybody on Long Island will have one within the next 10 years.

Q: Is it cheaper now to use electricity at night instead of during the daytime?

A: No, not right now. But when we go to time-of-use pricing, it will be.

Q: Is electricity more expensive for users during the peak times like July and August?

A: In a way LIPA does have to pay more at that time. It’s supply and demand. When everybody’s demanding it, the price goes up.

Q: Tell me about harnessing wind for energy. Everybody seems to be really against it because they don’t want the turbines in their backyard.

A: Wind is certainly something we’re putting an emphasis on now. There’s two types: our backyard wind program for your home or business. We offer incentives and rebates for that. And then there’s a large scale, just like the solar, to come into the grid for LIPA to buy. Long Island doesn’t have enough land for us to do large-scale projects like upstate New York or Texas, we’re surrounded by water. So we’re looking to do an offshore wind project.

Q: Hasn’t there been a lot of resistance on offshore projects?

A: Sure. I scrapped the one off of Jones Beach. It was too small, which made it too expensive. And it was too close, which made it too controversial. I scrapped that when I first came in. But I proposed a new project with Con Edison, so I’ve got a partner to share the cost and share the power. We’re exploring a larger offshore wind project off the coast of the Rockaways that will come into southern Nassau County, about 13 to 17 miles offshore. You’re not going to be able to see it, even on a clear day. We shouldn’t have a lot of opposition of those who are fearful of the aesthetic impact. We’re looking at it. It still needs to make economic sense and it’s difficult to build in the water. But if we do it, it will be the largest offshore wind project in the country.

Q: And what about the residential turbines, isn’t there opposition there too?

A: For the backyard wind program, you’re right, some people don’t want their neighbor to have a wind turbine, because, hey, that’s taller than any other structure. That’s the challenge with renewables. And there are some people who don’t want to look at solar panels in their neighbor’s roof. It happens.

Q: Not to be all doomsday, but if we don’t harness this kind of alternative energy, how long do we really have to keep pumping stuff out of the Earth?

A: I think there’s plenty of natural gas. There are huge reservoirs of natural gas deep down out west. The problem is how do we get it here? There’s always going to be a need for gas and there’s probably going to be enough of it. The concern is our climate and we need to start introducing more renewable resources because there is a direct correlation between the fossil fuel plants and our impact on climate. Washington and Albany are focused on that right now. It’s going to come down to the utilities to do something about it.

Q: You’re at the forefront of this type of thinking, right?

A: Yeah, we are. But I’m not interested in being first. I’m interested in getting it right. I’m not doing these things to be first, I’m doing them because I 
think it’s the right thing to be doing. I’m encouraged by both President Obama and Governor Paterson, who are leading the effort toward a clean energy economy.

Q: How does the political environment affect what you’re doing day-to-day?

A: We’re separate, even though we’re a state authority. I’m able to do my job based on the merits, I’ve worked for two governors, Spitzer and Paterson, and the philosophy has basically been ‘just do the right thing and we’ll back you.’ But what I get from the governor and the president is leadership politically, which makes it easier for me to be implementing efficiency programs when people hear our president and governor talking about it regularly.

Q: I remember when you presented that big check to the Hampton Bays School District for its LEED-certified middle school. As more and more schools and such go green, are you going to keep handing out checks?

A: Yeah, as long as we can. Every dollar a school saves on their utility costs is a dollar that can be used for a child, or it’s a dollar that’s not going to raise property taxes. It’s a win-win.

Q: What’s coming up in the future for LIPA?

A: 2008 was all about reform and transition. 2009 was building a clean energy foundation for a clean energy economy. 2010 is the year of strategic planning. All of our major agreements with National Grid expire in 2013. I can’t wait for 2013 to decide what to do in terms of extending those contracts, renewing them. We are looking at our options and doing a lot of strategic planning this year. I’m looking at changing LIPA’s business model. A lot of people don’t realize; you see a LIPA truck outside your house, we own the truck, we own the poles and wires.
The guys who come out of the truck are National Grid. The meter reader works for National Grid. When your lights go out and you call up somebody, the person on the other end of the phone works for National Grid—all under contract to us. I am looking at municipalizing, bringing in LIPA employees, taking out the public/private partnership we now have with National Grid and taking out the profit that they have embedded into the contracts to provide those services to us. For lower costs. I can’t wait for 
2013.