LIPA seeking proposals for a new manager for the electric grid as PSEG contract expires

LIPA on Wednesdayissued a bid request for contractors to manage the Long Island electric grid as PSEG’s contract expires next year and a state legislative plan to transition the utility to a fully public authority failed to gain traction.

The new request for proposals, announced Wednesday by LIPA’s interim chief executive, John Rhodes, comes amid a period of turmoil at LIPA as top officials and board members have departed in past months and a new interim management team has taken over.

Gov. Kathy Hochul has appointed four new board members, and a chairwoman in Tracey Edwards. One holdover appointee of former Gov. Andrew M. Cuomo, Laureen Harris, left the board this month without a replacement.

Rhodes in an interview said the request for proposals is “going to be a strictly competitive process,” with no advantage or “disfavor to PSEG” over its past failures. “It is entirely about running a neutral, fair, competitive process,” he said.

LIPA, in papers provided as part of the bidding process, outlined a schedule that includes a one-year transition period “to complete the handoff from PSEG Long Island to the next service provider by December 2025, if a bidder other than PSEG Long Island is selected.”

The contract, like the one PSEG is currently operating under, provides for a 10-year term with the option of a 5-year extension — terms Rhodes said provide for system stability and “continuity for the work force.”

LIPA in paperwork said the new contract will provide “more customer protections” tied to cost recovery for certain storms and makes the service provider responsible for paying governmental, regulatory and nongovernmental fines and penalties.

It also gives LIPA the option to remove clean energy programs from the service provider’s responsibility and have those programs coordinated by the New York State Energy Research and Development Authority, which Rhodes once oversaw as chief executive.

NYSERDA is “obviously a natural agency to consider,” he said in an interview Wednesday. “They’ve got some very effective programs.” The decision would be LIPA’s.

The new contract also would allow the service provider the option to propose initiatives that result in cost savings, and to share in those cost savings. The process would “only go forward if both sides agree the savings are real and it’s up to the proposer to do it,” said Rhodes.

LIPA’s bidding request requires that any bidders be a single entity or a combination of entities making a joint proposal, rather than offer various contracts for different aspects of the management job, as had been previously contemplated under LIPA’s former chief, Tom Falcone.

The proposal says the lead member of a joint proposal “must have experience managing and directing electric transmission and distribution utility functions, storm preparedness, response and recovery.”

The state comptroller’s office must approve the contract.

LIPA formally put out the bid on Wednesday, with bid responses due by Sept. 6. LIPA trustees are expected to give their approval for the winning bidder at the March 2025 board meeting, while the state comptroller will review it by June 2025. Certain parts of the transition could start as early as next July.

In addition to posting the request for proposals, LIPA must also market it to potential bidders. Con Edison, which previously bid on the LIPA contract that PSEG won in 2013, declined to comment. A spokeswoman for National Grid, which held the contract before PSEG won it, didn’t respond to a request for comment.

Rhodes acknowledged the timeline for a possible transition to a new provider, which would also have to bring a new brand if PSEG doesn’t win, is tight. But he said, “I’m confident we are going to be able to get it all done.”

He said he expects there’s “going to be interest” among other utilities in bidding for the LIPA contract. “We are spreading the word about this opportunity. It’s an interesting service territory that’s in pretty good shape.

The move comes as Assemb. Fred Thiele (D-Sag Harbor) on Tuesday amended his bill to transition LIPA to a fully public utility in a way that would extend the time for the transition by two years, to 2028.

Thiele, who is leaving office at year end, said the recent amendment recognizes that the State Legislature “was not going to mandate public power in this session,” which ends next week.

At the same time, he said, the move “creates a framework by which the new LIPA board would be established and would have until 2028 to make that decision.” The bill doesn’t yet have a Senate sponsor.

Thiele said a clause in the RFP that eliminates the service providers’ ability to terminate the agreement because of a change in regulatory law, and end LIPA’s obligation to pay a termination fee if a law such as his were to pass, could set the stage for public power in the future. He said the clause “is the best public power advocates can hope for,” given that his bill is stalled in the legislature.

Rhodes declined to comment on the fully public LIPA bill or Thiele’s amendment, adding, “My job is to run the operation the way it is now.”

Former LIPA trustee Peter Gollon expressed doubt about LIPA’s plan to complete the bid process and potentially replace PSEG. Gollon has criticized PSEG for performance failures during Tropical Storm Isaias, call-center shortcomings and customer satisfaction declines.

“I would like to think that despite the carnage and confusion of the past few months that they [LIPA] managed to put together a good RFP that corrects many of the weaknesses of the existing contract and the existing metrics,” said Gollon. “However, given the loss of the most experienced staff at the top of LIPA, and the loss of trustees who most cared about delivering quality service to LIPA’s customers, I have serious doubts that this will actually happen.”

Rhodes said he’s confident he and his team can get it done in a way that “generates the best proposals and the best outcomes” for LIPA ratepayers. “It’s our absolute commitment.”

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

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