Discussion of reverting Long Island Power Authority to government management pushed to fall

Published on May 23, 2023 by Hil Anderson

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The latest look at a government takeover of a privately run utility company will take a little longer to complete after state officials in New York rescheduled a planned hearing on the future management of the Long Island Power Authority (LIPA) to the other side of summer.

The state commission overseeing the proposed replacement of LIPA’s current management company in 2025 has asked the New York State Legislature to move a public hearing on the matter from May to sometime in September with a final report following in November on the proposal to turn LIPA back into a fully publicly run utility.

“We now continue our work to deliver a more efficient utility service with a higher level of accountability for Long Island ratepayers through an expeditious and transparent process that puts consumers first,” State Sen. Kevin Thomas (D-Garden City), commission co-chair, said in a release.

Thomas and the rest of the commission, officially known as The New York State Legislative Commission on the Future of the Long Island Power Authority, have been studying the feasibility of not renewing the current management contract with PSEG Long Island, a unit of New Jersey-based Public Service Enterprise Group (PSEG) when it expires in 2024. The next step would revert the utility back to government control the following year.

“This will allow the commission to continue to proceed with transparency and deliberation, while still delivering a plan well in advance of the next legislative session,” the commission said.

Pushing the commission’s hearing to the brink of 2024 also put to rest any chance the New York Legislature could part ways with PSEG Long Island before it adjourns for the summer on June 8. However, the commissioners said the summer would also provide them with additional time to look at the feasibility of the proposal before the Legislature convenes in the fall.

A long, hot summer may convince state lawmakers that changing horses could lead to more trouble than it is worth.

“Municipalizing the Long Island Power Authority is a terrible deal for families and small businesses,” said Marc Brown, vice president of State Affairs for the Consumer Energy Alliance.

Brown told Daily Energy Insider the change of management would eliminate much of the regulatory firewall that currently protects customers and place more risk in the laps of Long Island ratepayers and taxpayers. “It will transfer the financial risks that come from running a utility to taxpayers, instead of investors who understand the business,” he said. “Then there will be uncertainty, higher costs, plus the elimination of the regulatory oversight that keeps rates reasonable and energy reliable.”

The additional time would also allow stakeholders to regroup following the commission’s decision to dismiss one of its consulting firms. The dismissal followed the April 17 release of a feasibility study, which concluded that the public would likely reap some financial benefits if the utility was transitioned to a public power authority. According to the report, LIPA customers could conceivably save $50 million or more annually by replacing PSEG Long Island. The report said the savings would come through holding down future rate increases while also allowing upgrades to the grid and improved storm response. The findings will be discussed further at the fall public hearing.

“These next steps bring us closer to more efficient utility services with a higher level of accountability for Long Island ratepayers, and I look forward to sharing final recommendations with the Legislature in the near future,” said Co-Chair Thomas. “I am confident that the commission’s dedication to an expeditious and transparent process, including through direct participation during our public hearings, will produce a final report reflective of stakeholder concerns and suggestions.”

Officials at PSEG Long Island declined comment, but they have been pointing out that customers on Long Island and in New York City’s Rockaway community have reaped the benefits of the company’s expertise and ongoing grid upgrades and storm preparations; Long Island’s geographical orientation makes it particularly vulnerable to powerful Atlantic storms moving up the coast.

“For nearly nine years PSEG Long Island has been on the front lines managing the grid for LIPA, serving its customers, saving Long Island and the Rockaway ratepayers billions of dollars, responding to storms, and introducing energy innovations,” Christopher Hahn, vice president of External Affairs at PSEG Long Island, testified at a Dec. 22 hearing before the state legislature. “We are committed to excellence and to continuous improvement — and we have an Operating Services Agreement in place that provides the checks and balances that are key to an effective and efficient public-private partnership.”

Hahn also told the lawmakers that LIPA had seen a 31 percent improvement in system reliability under PSEG Long Island’s watch, thanks in part to ramped-up vegetation management. The utility also had the lowest frequency of outages in 2021 and second-lowest outage time per customer among the nation’s major power providers. “We believe it is a proven, tested model where PSEG Long Island can continue to provide the Rockaways and Long Island with the outstanding electric service they expect,” he said.

The contract arrangement between LIPA and PSEG Long Island makes it different from other locations where utilities have been the subject of public takeover discussions, but the pros and cons remain similar and should give the public some pause before taking the potentially expensive and complex plunge.

Brown pointed out the recent overwhelming rejection of a ballot proposal in El Paso, Texas, that included consideration of municipalizing El Paso Electric. “Voters said no to the proposal because of the higher taxes, increased costs and unreliable service it would have introduced, which is a strong signal that New York can study and learn from,” he said.