6 LIPA trustees write to NYS officials to defend canceling search for grid manager

Six LIPA trustees who canceled a yearlong process to award a contract for the authority’s next grid manager have written a letter to top state leaders defending their actions.

The letter was sent to Gov. Kathy Hochul and majority leaders in the Assembly and Senate. "The purpose of this letter is [to] express our continued commitment to reliability, affordability, and transparency," according to a copy of the letter obtained by Newsday. The board members emphasized to top state officials that the letter required "no action from your side."

The trustees asserted their independence in voting to extend the utility's existing contract with PSEG, saying each "conducted their own due diligence and have individual reasons to support their vote at the April 30th board meeting" that rejected a recommended bidder, Quanta Services of Houston. The letter did not address the finding by LIPA's top officials who reviewed the bids that found PSEG "did not satisfy certain minimum requirements." 

A LIPA spokeswoman confirmed the letter’s existence Wednesday, but declined to comment on it. LIPA didn't answer a list of Newsday questions about the letter, including whether it was reviewed by newly retained lawyers for LIPA at the firm WilmerHale amid an ongoing state Inspector General's investigation, or by trustees' individual lawyers.

PSEG said it is "looking forward to the discussion to extend its partnership with LIPA." 

Quanta, in a statement to Newsday on Wednesday, said: "It remains a mystery as to why LIPA’s board ignored its own staff’s recommendation — the stronger proposal — and is now considering extending its contract with the current operator whose bid had not even met the minimum qualifications. Hopefully, the reported investigation will shed further light on the situation. We continue to believe that LIPA customers across Long Island and the Rockaways deserve better."

Tuesday's letter comes after the six trustees in April took the unprecedented step of rejecting as "wrong" the recommendation of experienced LIPA officials after a yearlong review to award LIPA’s major operating contract to Quanta. Two board members abstained from the vote and one recused. Among those who strongly recommended LIPA drop PSEG and award Quanta was John Rhodes, now LIPA's interim chief executive and a former Public Service Commission chairman.

The board’s resolution last month to cancel the request for proposal process said it was the board's "responsibility to prevent any action or circumstances that may result in an actual conflict or create the appearance of a conflict of interest or any other impropriety, and to uphold LIPA’s Code of Ethics and Conduct."

Rhodes, at the end of last week’s LIPA board meeting, acknowledged he had at one point owned a quantity of Quanta stock in 2024 during the bid review period, but that he’d sold all shares "immediately" once he became aware of it in December. A financial adviser handles Rhodes' investments. 

Rhodes made his statement only after being granted permission to speak in the waning moments of the meeting by board chairwoman Tracey Edwards. After his remarks, Edwards asked Rhodes to clarify that he did not specifically inform the board of his prior stock ownership, but he declined to elaborate. Rhodes has not been accused of any wrongdoing. 

Board members learned of Rhodes’ stock issues only after they had already voted to reject Quanta, the resolution's timeline noted.

The trustees' letter to Hochul, Senate Majority Leader Andrea Stewart-Cousins (D-Yonkers) and Assembly Speaker Carl Heastie (D-Bronx) this week makes no mention of Rhodes’ stock sale.

Canceling the contract meant LIPA would go forward with PSEG, negotiating an extension of the company’s existing contract, which expires at year's end.

LIPA on Tuesday declined to answer questions on the matter, including to say whether any new terms that PSEG made in the now-cancelled bidding process included better terms for ratepayers.

Now, a new "team" to be determined by the board will negotiate the contract extension with PSEG, an unprecedented move for a utility that in the past has used experienced staff to negotiate contracts. LIPA declined to say who would be on the committee, including whether the existing contract review team members would be appointed to it.

Rhodes is expected to leave LIPA in the coming weeks, and among the candidates for his replacement, Newsday has reported, is Carrie Meek Gallagher, director of the Department of Public Service Long Island, the top outside oversight body for LIPA. Thus far, DPS has not publicly weighed in on the turmoil surrounding the LIPA bidding process.

Tuesday’s letter reiterates talking points Edwards previously gave during the April 30 board meeting to reject Quanta, including that Quanta lacks "end-to-end experience" in running a utility; that Quanta "would not have been less expensive" over a 10-year period; and that "a simple Google search of LUMA Puerto Rico uncovers countless articles of reliability failures" by the company Quanta works with in a joint venture.

Quanta noted its May 20 letter to the LIPA board broached "numerous misstatements and factual errors upon which the board claims to have based its decision, which is why a competitive process led by utility experts is the industry standard for a large procurement rather than relying on a Google search."

The trustees who wrote Tuesday's letter, including Hochul appointees Edwards, Vanessa Baird-Streeter, Claudia Lovas and Mary Ellen Mendelsohn (as well as Senate appointee Mili Makhijani and Assembly appointee Valerie Anderson Campbell), said "reliability and affordability are at the core of all decisions."

"We even delayed our vote to allow the selection committee and the LIPA staff outside consultant to provide additional information to us based on our questions after we learned more about Quanta," they wrote. LIPA declined to identify the outside consultant.

The letter is copied to Nassau and Suffolk County executives, county presiding officers, a village supervisors' association and the Long Island Association, a business group where Edwards previously served as a board member and consultant.

A copy of the letter was sent to state Attorney General Letitia James and Comptroller Thomas DiNapoli, both of whose offices must approve LIPA's contract, though the list does not include the Inspector General’s office.

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

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