Panel calls for elimination of LIPA

Panel calls for elimination of LIPA

By MICHAEL GORMLEY | AP

ALBANY, N.Y. (AP) — The powerful commission overseeing the response of New York utilities to Superstorm Sandy recommended eliminating the state's Long Island Power Authority and replacing it with a private company, an idea that was immediately questioned Monday as a threat to create even higher rates.

The Moreland Commission created by Gov. Andrew Cuomo criticized LIPA as unprepared for Superstorm Sandy then inept in its response, leaving many of its 1.1 million customers without power for as long as 21 days.

The commission also recommended the state's utility regulator since 1907, the Public Service Commission, be scrapped or strengthened so that it can mete out penalties that aren't passed onto to ratepayers or even terminate a utility's ability to operate in New York.

"The six utilities operating in New York and LIPA are operating at monopolies in their own exclusive service areas with no chance of losing all or part of their territory because of ineffective, weak or toothless government oversight," said Robert Abrams, the former attorney general who is a leader of the Moreland Commission.

State Financial Services Superintendent Benjamin Lawsky said LIPA's management was "fundamentally dysfunctional." He said a "PSC on steroids" is needed to protect customers.

The commission considered other options for LIPA, including eliminating its contract or transferring operations to the upstate New York Power Authority, but ultimately backed privatization.

That recommendation drew immediate criticism.

"It's very unrealistic," said Matthew Cordaro, a professor and scientist in the energy field and former utility executive who is now co-chairman of the Suffolk Legislature's LIPA Oversight Committee.

He said dropping LIPA for a private company would further drive up some of the nation's highest rates and leave the state holding an estimated $3 billion in debt. A better option would be to convert LIPA from a state authority to a local or county authority with local representatives in control, the most common structure nationally.

"Public power works because it's cheaper," agreed Richard Brodsky, a former Democratic assemblyman whose committee oversaw authorities and is now with the Wagner School at New York University. "It's efficient to use tax-exempt financing." He said LIPA instead should be made more efficient.

LIPA —which has more than 1.1 million customers on Long Island and the Rockaways in Queens — is "reviewing the report and will continue to cooperate with the state and the Moreland Commission to do what is in the best interest of Long Island's ratepayers," said the authority's spokesman, Mark Gross.

Cuomo said LIPA, created in 1985 under the administration of his father, Gov. Mario Cuomo, has outlived its original intent and never "made any sense" as a retailer of energy.

LIPA has often been criticized for slow restoration of power after several storms over three decades. That criticism has only intensified in the wake of Sandy, which followed Tropical Storms Lee and Irene last year.

Cuomo said past governors lacked the "political will" to force change. He denied sharing any blame for LIPA's shortcomings despite not filling the utility's CEO job or vacant board positions.

"LIPA was flawed from inception, there is nothing you can do with the existing structure," Cuomo said.

Cordaro said Cuomo has a role in LIPA's failure.

"He could have paid more attention to LIPA," Cordaro said "Obviously, there were vacancies, the CEO position had been vacant for two years ... that made a bad situation worse. LIPA was a loser from Day One."

The commission said it had no basis from other storms in other states to determine whether utilities could be proven to have acted too slowly to restore power from Sandy.

AP Writer Frank Eltman contributed to this report from Mineola, N.Y.