LIPA trustees vote down staff recommendation to choose Quanta as new grid manager

The future management of the Long Island electric grid was thrust into uncertainty Wednesday after six of the utility’s board of trustees voted to reject Quanta Services as the region’s new grid manager, ignoring a strong staff endorsement. 

The unprecedented move by four of Gov. Kathy Hochul’s five appointees, led by Chairwoman Tracey Edwards, drew gasps from a small crowd of utility observers at the unscheduled Wednesday morning board meeting.

Edwards, a senior vice president of Sands New York, the casino giant that recently withdrew its bid for a gaming facility in Nassau County across the street from the Long Island Power Authority, called the recommendation by LIPA’s top officials in favor of Quanta "wrong."

Gordon Tepper, a spokesman for Hochul, said the governor’s staff was "aware of the board’s decision."

What happens next is uncertain, particularly amid an apparent no-confidence vote by the board in LIPA’s top officials after the rejection of their yearlong work. LIPA’s top official said after the meeting that next steps were “still to be determined.” The board is scheduled to meet again May 22.

In dueling statements during the meeting, LIPA’s acting chief executive John Rhodes, a former chairman of the state Public Service Commission who has served as a White House adviser on energy, noted the selection committee's decision was "unanimous and clear." 

"Quanta offered the best package of technical merit and capacity to perform, economics and key contractual provides," he said, including storm response, employee development and reliability improvement. 

But Edwards said, "I believe the selection committee was wrong to recommend Quanta."

"I do not believe that Quanta is qualified," Edwards added. "I disagree with the selection committee recommendation, and I do not believe that Quanta is right for Long Island."

Edwards, seated beside a newly appointed board member, Anthony LaPinta, who abstained from the vote, also alleged during the meeting that the procurement process had been beset by "leaks of confidential information to the media ... intimidation tactics and other tawdry things that you would not expect to happen ..."

Edwards did not elaborate and declined an interview request. She then led the board in the latest of a half-dozen closed-door executive sessions in recent months.

Only David Manning, a Brookhaven National Laboratory official and former National Grid executive, voted in favor of awarding the contract to Quanta. Manning also is a Hochul appointee.

In addition to Edwards, those voting against Quanta were Vanessa Baird-Streeter, Claudia Lovas and Mary Ellen Mendelsohn (all Hochul appointees), Mili Makhijani, a State Senate appointee, and Valerie Anderson Campbell, an Assembly appointee. Dominick Macchia, a Senate appointee from the International Brotherhood of Electrical Workers, abstained from the vote.

In an interview after the vote, Rhodes said the board's vote not to accept his recommendation "shows that we've got work to do. We still need to get to a place where we've got a service provider that's the right one with the right contractual arrangements." 

Asked if the board could extend the PSEG contract or simply hand it to PSEG, despite its lower score in the review, he said, "That's still to be determined ... I hear others say that's a possibility. It's still [to be] sorted out." 

Rhodes said he didn't interpret the board's vote to reject Quanta as a no-confidence vote in him and top executives. He noted it was primarily Edwards who spoke (only Macchia asked a question during the process), and said, "There were conclusions that were different from ours. I think that's OK." 

During the meeting Rhodes said LIPA’s top three officials, including acting Chief Operating Officer Werner Schweiger, a longtime utility executive, and Billy Raley, a senior vice president, "strongly" recommended Quanta after a "thorough, rigorous and fair bidding process" lasting more than a year.

Quanta’s final proposal, he said, "exceeded expectations," while PSEG’s "fell short of the grade of meeting minimum requirements."

He cited "operational excellence in storm response," key because storms are the "greatest risk we face" on Long Island, and noted Quanta’s "proven track record in rapid storm mobilization and restoration."

Quanta is also a leader in major electric reliability projects, he said, and has a record of investing "heavily in its workforce," adding there was "minimal transition risk" in Quanta’s taking over in the coming months because its plan was "strong and achievable."

Quanta also offered to freeze rates through its first year and discount its management fee for three years.

In the end, Rhodes said, the procurement record is "clear: Quanta Services offers superior value, superior performance potential and a stronger operational fit for Long Island’s needs."

But Edwards charged that Quanta didn’t have the comprehensive management experience of running a utility end to end needed to run the Long Island grid, and she pointed to public comments critical of Quanta’s joint venture Luma in Puerto Rico to suggest there was a risk. (Rhodes rebutted those claims, noting that most of Luma's blackout problems were the result of a shortage of around 400 megawatts of generation capacity.)

Edwards noted she had family members in Puerto Rico to suggest she was aware of ratepayer frustrations, and a niece who was a "certified doctor" who needed residency experience in addition to passing tests to practice medicine. "You have to have demonstrated experience," she said, suggesting Quanta didn't.

"I do not believe it is appropriate for Long Island to be a training location in furtherance of a proof-of-concept model," she said.

She later added, "While Quanta does have strong capabilities to handle part of the business, they do not in my opinion have demonstrated experience. They are an excellent company of companies, but I do not believe they are right for Long Island."

Even before the meeting, as word of a possible board rejection circulated, LIPA observers weighed in.

Former LIPA Vice Chairman Mark Fischl during the board meeting read a statement from himself and two other former board members, Sheldon Cohen and Elkan Abramowitz, to note that they had never rejected the unanimous recommendation of the staff.

"Given the numerous failures we witnessed from PSEG during our board tenure, ignoring this staff recommendation to select a new provider does not seem like a sane course of action," he said. Noting the experience of the LIPA officials who made the recommendation, Fischl concluded, "To reject their recommendation concerning the [contract] ignores what would be in the best interests of the ratepayers and constitutes the height of arrogance."

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

Mark Harrington, a Newsday reporter since 1999, covers energy, wineries, Indian affairs and fisheries.