PSEG won't receive annual incentive bonus due to Isaias response, Cuomo says

Gov. Andrew M. Cuomo took sharper aim at PSEG Long Island Wednesday, nixing its potential nearly $10 million annual incentive bonus over the utility's widely criticized response to Tropical Storm Isaias.

Cuomo during a conference call Wednesday once again threatened to revoke PSEG's contract to operate the Long Island electric grid. He said he issued PSEG and three other electric utilities notices of "apparent violation" pending the results of a state investigation into their "failures" to adequately respond to the storm that left at least 420,000 Long Islanders without power and most unable to contact the utility or receive accurate restoration times.

A violation notice also went to Altice-Optimum, Cuomo's office said. The three other electric utilities are Con Edison, Orange & Rockland and Central Hudson. Each face "steep penalties and must take immediate corrective actions" to prevent future system failures at the height of storm season, Cuomo's office said in a statement.

"The response to tropical storm Isaias by the electric utilities was completely unacceptable," Cuomo said in a statement issued after his briefing.

Cuomo earlier said PSEG has "already been notified they are not going to receive their incentive bonus" for 2020 but his later statement said the state Department of Public Service (DPS) has "called on PSEG to forfeit" the payment, which PSEG earlier pledged to use to pay a customer food and medicine reimbursement program.

PSEG received $9.81 million in total incentive compensation in 2019. 

The governor’s office then clarified that the reimbursement fund will still come from the money forfeited from the company’s incentive pay, and that if reimbursement claims exceed $10 million, a potential PSEG penalty or other PSEG shareholder funds would cover the balance. A PSEG spokeswoman didn’t return a call seeking comment.

Speaking to reporters, Cuomo took issue with the DPS performance in holding utilities’ feet to the fire concerning storm response, saying he will empower the state Department of Finance to work with DPS to contribute forensic audits and other tools to help in probes of utilities’ response to the storm.

“I want a faster, more thorough investigation than they’ve done in the past,” Cuomo said of the DPS.

The subsequent news release from Cuomo's office, however, lauded DPS for completing the first phase of its investigation "in record time." 

Cuomo's administration wrote the LIPA Reform Act of 2012 that gave DPS lighter “review and recommend” scrutiny of LIPA and PSEG instead of the full Public Service Commission regulation covering other state utilities. But the governor said he’d also propose new legislation to “facilitate, expedite and clarify” the process for revoking a utility's operating license.

A senior LIPA official said, historically, LIPA and PSEG have “accepted every recommendation offered” by the DPS to operate the utility.

LIPA trustee Matthew Cordaro, speaking for himself, suggested that Cuomo consider another target for his wrath about PSEG's storm response: the governor himself. 

"He's the boss of LIPA," Cordaro said of Cuomo, who controls the nine-member board with five appointees. The LIPA board is the authority's ultimate "regulator," approving rate increases, operating and storm plans and budgets, among other things. "So if there's anyone to blame, if the buck has to stop anywhere, it stops with him.  I don't think he understands that. This is his show. He is as much to blame."

But Cordaro agreed with Cuomo in criticizing the DPS. 

"He's absolutely right — the DPS is worthless," at least in the LIPA/PSEG "review and recommend" iteration, Cordaro said. "They have people who are not very experienced, they hide in the shadows, they don't want to take responsibility for anything. But Cuomo is also the guy always ordering the DPS what to do."

A DPS spokesman pointed to Cuomo's statement in response to a request for comment. Representatives for LIPA and PSEG didn't immediately provide responses. 

Cuomo said the legislation he's proposing will help clarify and perhaps untangle ownership of assets and other matters when the state decides to make good on a threat to revoke a franchise. “If you revoke a franchise from a utility then what happens going forward?” he asked. “Who [owns] the cables and the telephone poles and the trucks?" 

It will also address the prospect that a utility would “just find a confounding way to wrap this up in litigation for a long period of time. And litigation can cause more chaos.”

Since PSEG took over the LIPA-grid-management contract in 2014 (after beating out National Grid following its poor post-Sandy performance), PSEG each year has received most or all of the incentive bonus, in addition to PSEG’s base $58 million annual contract management payment.

The incentive bonus is tied to PSEG’s performance against 25 performance metrics, and LIPA has allowed PSEG to use higher scores in some metrics to shore up (and receive pay for) lower scores in others.

By Mark Harrington

mark.harrington@newsday.com,lisa.colangelo@newsday.comMHarringtonNews,

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