LIPA faces $5.3M in overruns tied to problems with PSEG computer transfer

LIPA ratepayers are facing $5.3 million in unexpected costs from a $68 million project to separate Long Island computer systems from PSEG’s New Jersey parent company, after a series of delays and missteps delayed the complex project for more than a year.

The Long Island Power Authority and the state Department of Public Service in 2022 identified the computer work as crucial after Tropical Storm Isaias showed the reliance on PSEG’s parent computer systems in New Jersey left LIPA vulnerable, particularly during high-stress periods such as storms.

A LIPA official described the work as similar to a “divestiture,” one that involves extracting some 71 separate systems, including email, cybersecurity and a multitude of employee and customer systems.

LIPA and PSEG initially reviewed the work and believed that 46 systems had to be transferred, but later in 2023 they “discovered another 25 applications,” delaying the work, an official said.

In a presentation during a LIPA board meeting Wednesday, LIPA’s acting chief information officer Brian Rudowksi said the new plan to finish the work, originally scheduled for the end of this year, has been pushed back to the end of 2025 — about the same time PSEG’s contract with LIPA also ends. PSEG is in the running for a new bid request to take on the contract starting in 2026.

In a section of his presentation described as “risks,” Rudowski noted that an unidentified computer contractor leading the work has made two separate claims seeking a combined $5.3 million from LIPA/PSEG tied to delays that Rudowski indicated were the result of the contractor’s own missteps. PSEG is overseeing the work.

One big cause of the overruns was that the contractor “opted not to” use a specific company to conduct critically needed background checks of the approximately 100 people required for the work.

The contractor “was told to use a specific background check vendor in order to get clearance to do work for us,” said Rudowski, a former PSEG tech manager. “They opted not to and they used someone else and so those [workers] had to be re-evaluated and background checks had to be re-evaluated, which was a delay.”

In addition, he said, PSEG didn’t have the internal capacity to process the 100 new workers that had to be screened. “Bringing on that many people was kind of a shock to them,” Rudowksi said. There was even a second level of clearance needed for people working on sensitive information, such as nuclear power plant data that had to be “scrubbed” from PSEG’s parent database, resulting in a three-month delay, he said.

The project also relied on some internal PSEG computer experts in New Jersey, Rudowski noted, but many of those employees were “doing their own projects” and couldn’t always be accessed. “We depend on some of those [PSEG] folks in order to help us with our projects but their availability has not been great,” Rudowksi said.

The migration of the computer systems is happening in four phases, with the largest and most complex now scheduled to be completed by November. LIPA in the past has said the work is essential not only so that LIPA can give priority to Long Island-centric systems, but also in case LIPA decides to award the grid management contract to another company.

Board members who attended the presentation Wednesday expressed urgent frustration.

“I mean, nobody saw this coming?” said trustee Drew Biondo, an Assembly appointee.

Bobbi O’Connor, LIPA’s general counsel, advised trustees not to discuss the $5.3 million claims sought by the vendor, noting that they are “pending claims.”

Trustee Dominick Macchia nevertheless sought clarification about whether the contractor making the claims was the same one who “didn’t follow proper procedure and that started the ball to where we’re at with these claims. To me it sounds like insanity,” he said.

Acting LIPA chief executive John Rhodes, a former DPS chief executive who began at LIPA in March, told trustees that he “shared your urgency” and the importance of “getting this right.”

“We still have to get it done,” Rhodes said. “That’s my job. I’m registering your comments and concerns, which I share. I want to tell you in public that you’re right and I hear you and that’s my job. This has to get done right.”

Newsday reported Tuesday that PSEG missed critical performance targets in 2023, making it eligible for 69%, or $15.3 million, of a total potential incentive pay of $22.2 million. It fully met 59 of 93 metrics, while missing 17 and partially meeting 16. David Manning, an appointee of Gov. Kathy Hochul, suggested reducing the number of metrics, something LIPA said is already underway.

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

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