PSEG should get $15M incentive bonus for meeting performance metrics, state says

PSEG Long Island fully met 59 of 93 performance targets set by LIPA for 2023 and as a result should get $15.38 million of an incentive bonus that could have exceeded $22 million, reports released this week said.

PSEG got credit for partly meeting 16 of the metrics, but it missed 17 of the total, a report by LIPA found. One metric was canceled. The metrics rate PSEG's performance for areas such as system reliability, customer satisfaction and hardening the system for storms. 

A final analysis by the state Department of Public Service released Monday mirrored the findings by LIPA in its annual review of PSEG’s 2023 performance. PSEG, which operates the electric grid for LIPA under an $80 million annual contract set to expire next year, disputed some of the findings and said it believed it should receive $17 million of the potential $22.2 million. DPS, which has “review and recommend” authority over the Long Island electric utility, called LIPA’s findings for a lower amount “reasonable,” even while DPS chief executive Rory Christian largely complimented PSEG in a letter dated June 11.

In 2022, PSEG qualified for $14.8 million of a potential $21 million in bonus compensation, Newsday reported, after meeting 73 of 96 metrics that year.

PSEG’s overall qualification for $15.3 million represents a 69% financial achievement rating, the LIPA report says. PSEG’s claim for $17 million represents just over 76% of the total compensation. A PSEG spokeswoman didn’t immediately respond to a request for comment.

By category, PSEG met most metrics in the “transmission and distribution” portion of the targets, reflecting good performance in maintaining electric system reliability and earning $7.5 million of a possible $8.9 million, the report said.

PSEG fell short in categories such as customer service, earning $2 million of a potential $4.5 million, and information technology, earning $1.2 million of a potential $3.3 million, according to LIPA findings.

LIPA officials last year had been critical of PSEG’s delayed completion of a project to migrate 46 LIPA computer systems from PSEG’s home base in New Jersey to Long Island. The computer migration is an important task to assure a level of information technology independence should LIPA decide to hire a new contractor to operate the grid, as DPS had recommended after PSEG failures following Tropical Storm Isaias.

LIPA recently issued a bid request for the grid management contract as PSEG’s pact ends in December 2025. PSEG could have earned $668,560.02 for meeting the “system segregation” metric, but LIPA found PSEG met none of the milestones, and thus was awarded zero compensation for it.

Of the total 42 transmission and distribution metrics, PSEG fully met 31, partially met three and missed seven, LIPA reported. LIPA agreed to grant 48 exception requests to adjust metric targets and due dates to help make the targets easier to achieve during the year, the report says. “Reliability performance continues to be strong,” the report says, while “strong performance” was met in work management, storm hardening, capital projects and construction.”

PSEG didn’t fully meet metrics for worker safety, the report says, and missed a new metric for vegetation management effectiveness, which examines tree-trimming work around poles and wires. Another metric aimed at reducing the number of double wood poles was unmet for the second year in a row, because of “continued struggles” working with outside entities to coordinate pole removals, LIPA said.