State senators irked by the way PSEG plans to pay for spoiled food, medicine

Eight state senators are demanding that PSEG change the way it pays for a program to reimburse ratepayers for spoiled food from Tropical Storm Isaias, saying company shareholders, not ratepayers, should pony up.

The demand, in a letter sent to LIPA's top executive that refers to PSEG Long Island's program funding as a "shell game," comes as PSEG revealed that a similar program recently launched for utility customers for its sister New Jersey company will be funded directly through corporate, or shareholder, money. 

LIPA, in response, asserted that because the Long Island reimbursement plan is coming from performance incentives that would otherwise be paid to PSEG, the Long Island reimbursements “come from shareholders, as you seek.” Added PSEG spokeswoman Ashley Chauvin, "Since Long Island’s reimbursement claims are being funded from incentive compensation, these funds do come from PSEG shareholders."

But one senator wasn’t buying it.

“It is inexplicable why New Jersey customers are getting better treatment than Long Island customers,” State Sen. Todd Kaminsky (D-Long Beach) said.

PSE&G, which operates the company’s New Jersey gas and electric utility, this week announced a policy that largely mirrors one introduced for PSEG Long Island customers last week, offering reimbursements for up to $250 for lost food and $300 for lost medicine. Commercial customers can get up to $5,000 for lost food. Outages for both territories must be for more than three days between Aug. 4 and Aug. 12.

Asked how the company would pay for the New Jersey customers’ policy, the company spokeswoman indicated PSEG shareholders would pony up.

“The reimbursement will be a PSEG expense, and we do not intend to seek recovery from customers,” Chauvin said in response to a Newsday inquiry.

That’s different from a policy for PSEG Long Island, where the company said it would forgo upward of $10 million in incentive bonus it receives each year from LIPA ratepayers for meeting a list of more than two dozen performance targets. The company has received most or all of the bonus for each of the past six years, since taking over management of the Long Island grid in 2014.

A bipartisan contingent of state senators sent the letter to LIPA chief executive Tom Falcone this week, expressing “great concern” over how PSEG is funding the Long Island policy.

Noting that the pool of money that funds PSEG’s incentive bonus is paid from Long Island ratepayers, the lawmakers said, “PSEG Long Island’s shareholders, and those from its parent company, PSEG, should fund these reimbursements.”

The letter, signed by Kaminsky, Kenneth LaValle (R-Port Jefferson), Phil Boyle (R-Bay Shore) and Jim Gaughran (D-Northport), among others, notes that PSEG and related companies have “reaped tens of millions of dollars in profits from past bonuses … .”

Those bonuses, the senators wrote, were “based on meeting performance metrics [which, based on their performance during the last storm, is highly questionable whether such previous bonuses were merited], and it is far more just to ask them [shareholders] to use those funds instead.”

Kaminsky said he believed PSEG should be denied its bonus this year “because they failed to meet their goals.” PSEG repeatedly was criticized for its response to Isaias, in which more than 420,000 of LIPA's 1.1 million customers lost power and most could not get through to the utility to report their outage or find out when their power would be restored.

The letter, also signed by Sens. John Brooks (D-Seaford), Monica Martinez (D-Brentwood), Kevin Thomas (D-Levittown) and Anna Kaplan (D-Great Neck), said the arrangement to pay the Long Island fund from its bonus “smacks of a shell game,” and would be better paid from shareholders so the company can “feel the consequences of its failure.”

Falcone, in a letter to the senators sent Friday, took issue with the claim the merit of past bonuses being “highly questionable,” noting the performance targets are “independently audited” by LIPA and the state Department of Public Service.

Falcone wrote that while PSEG’s communication and restoration system failures during Isaias were “inexcusable,” noting its systems "did not meet standards of our contract,” that there is “recourse” for those failures. And LIPA is investigating the failures and making sure PSEG fixes them now.

Public Service Commission chairman John Rhodes, during state hearings with state lawmakers last week, defended the bonus-funded reimbursement policy as one the Department of Public Service helped negotiate, and he emphasized the potential for future penalties, including termination of PSEG’s contract, remains.

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

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