Freeport's electric utility, which serves 14,700 customers in the village,...

Freeport's electric utility, which serves 14,700 customers in the village, is one of three municipal utilities on Long Island, which is otherwise chiefly served by LIPA. Credit: Yeong-Ung Yang

The Village of Freeport has asked the state Public Service Commission to give a second look to the village electric utility’s request for a rate hike, saying  in a state filing  that it found “substantial errors of fact and law” in a recent PSC order denying an increase. The village also alleges improper contacts by PSC officials, lawyers for the village said in the filing.

In requesting a rehearing of its request for a 4.65% rate increase to raise $1.26 million from ratepayers, Freeport Electric said it has “not recovered from [superstorm] Sandy” and that COVID-19-related financial impacts have left the utility in “very difficult straits.”

Freeport’s electric utility, which serves 14,700 customers in the village, is one of three municipal utilities on Long Island, which is otherwise chiefly served by LIPA. Freeport, Greenport and Rockville Centre municipal utilities get some of their low-cost power from the hydroelectric plants operated by the New York State Power Authority. Freeport owns and operates a power plant in the village.

Freeport first filed the rate request last August, but then agreed to delay any hike until October 2020, in line with other state utilities because of COVID-related financial impacts on customers during spring lockdowns.

But a subsequent PSC order handed down June 11 effectively left the utility’s rates unchanged, after the PSC allowed some expense-related increases but cut the utility’s property tax payment to the village, called a “tax-equivalent payment,” by some $900,000, according to the filings. The village, which owns the utility, would have to make up the shortfall, a decision that left Freeport in a “perilous and unsustainable economic condition,” the filing says.

Freeport charged the unexpected revisions to its rate request apparently came about after “a series of phone calls were made by interested individuals on Long Island” after village attorneys had completed the traditional exchange of documents with the Department of Public Service staff. Those communications allegedly included “a telephone call from a sitting commissioner to a local New York State Senator, strongly urging the withdrawal of even this small rate increase request,” according to the village’s filing.

State Sen. John Brooks (D-Seaford), in an interview, acknowledged he'd been contacted by PSC Commissioner Tracey Edwards concerning the Freeport rate case, but declined to discuss it further. 

“That concerning contact is the subject of a State Investigator General’s complaint and a complaint to the Nassau County District Attorney’s office,” the village said, apparently referring to the state Inspector General.

Nassau County DA spokeswoman Miriam Sholder acknowledged the office has the complaint but said, “Given that the allegations appear civil in nature, we will defer to the state agencies with jurisdiction to review them.”

Inspector General spokesman Lee Park acknowledged the agency received a complaint from the village earlier this year.

“We reviewed the complaint and determined that the allegation raised — the appearance of a possible conflict of interest — should be referred to the Public Service Commission for its redress,” Park said. “We await a response from the PSC.”

The PSC said, “Because of the complaint, Commission[er] Edwards, out of an abundance of caution, recused herself from the proceeding,” including the vote by the PSC on June 11 that left the utility’s rates effectively unchanged.

In a statement, Edwards, a former Huntington Town Council member who also is Long Island regional director of the NAACP, said, "I’ve been an advocate and reformer for justice and fairness my entire career and have never wavered. I look forward to continuing to protect the interests of ratepayers and other stakeholders as a Public Service Commissioner."

The village called the PSC order “a shock” while charging that the move to reduce the tax payment “appears retaliatory against the village in its filing of the complaints” with the IG and DA’s office. A copy of the complaint was also sent to a DPS attorney April 29, the date it was filed.

PSC spokesman James Denn said, “The Village of Freeport filed a petition for rehearing. Any allegations raised in the petition would be addressed by the PSC when it decides upon the rehearing petition.”

In a footnote to its request for a rehearing, lawyers for the village also noted that “executive staff members” of the commission contacted Freeport Mayor Robert Kennedy seeking to “discuss or otherwise enter into negotiations to discuss” the tax payment.

But after the village filed complaints with the DA and IG, DPS staff “refused to speak to the village, calls were not returned, and what went from a delayed decision in October became this instant order,” which the village charged reflects “the retaliatory nature of this proceeding.”

Calls to Kennedy’s office and the village electric utility were not returned.

At the June 11 meeting at which the PSC approved its order, after Edwards recused herself from the vote without explanation, another commissioner, John Howard, took issue with the “reliance of local governments on revenue streams based on utility payments,” which he called “not sustainable.”

“ … it really doesn't matter which pocket government takes your money from, whether it's from your utility bill or for your real property tax bill or your income tax or your sales tax,” Howard said, according to a transcript. “So that shading real property tax burden by placing the burden on, in this case, electric customers is not well-served.”

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