State commission advances proposal to make LIPA a fully public utility

A state commission on Friday voted to approve a final report and proposed legislation on the future of  the Long Island Power Authority as a fully public utility, projecting annual savings of upward of $80 million and creating a bigger role for an expanded, and paid, LIPA board.

The move sends the proposed legislation to the full State Legislature, where it must be approved by the Assembly and Senate before moving to Gov. Kathy Hochul's desk. Legislation could be introduced early next year. 

Assemb. Fred Thiele (D-Sag Harbor), who sponsored the bill and co-chaired the commission, said he prefers that stand-alone legislation to create a fully public LIPA be introduced in the legislature before year's end, and not be taken up as part of the state budget. He said he's optimistic that such legislation will be approved. 

"This is an issue that is so central to being a Long Islander that this of all things should be a stand-alone bill," he said. 

The vote by the bipartisan commission to accept the final report and the legislation was 5 to 1, with State Sen. Monica Martinez (D-Brentwood) the member voting against. Martinez, who as Newsday has reported received $2,000 from a PSEG-sponsored political action committee last year, said her opposition was based on objections from people in her community and wasn't influenced by PSEG's donation. PSEG has opposed LIPA becoming public.

"The numbers are not there in my opinion," said Martinez of the projected $50 million to $80 million in savings under the new LIPA structure.

Two commission members did not attend the session, but one, State Sen. Anthony Palumbo (R-New Suffolk), issued a letter in support of the report and proposed legislation, saying his focus has been to "formulate a proposal that will lower costs for Long Island families and businesses, ensure reliable service, protect workers, and provide a governing model with local control and accountability." 

Assemb. Doug Smith (R-Holtsville), who attended the meeting and voted to advance the measure, said he was "happy with a lot of the discussion" that took place during the commission deliberations, particularly the expansion of the LIPA board to include more local representation. 

Friday's vote wrapped up more than a year of work by the state-financed commission, which this week finalized recommendations for the makeup of the LIPA board and the involvement of the state comptroller in reviewing LIPA contracts. It recommends a continued role for the state Department of Public Service in reviewing LIPA.

Among provisions in the bill is an expansion of the LIPA board from nine members to 13, with no entity having outsized control of appointments. The current board is made up of five appointments by the governor and two each by state Assembly and Senate leaders.

Under the new structure, the governor, the Assembly and the Senate would each have two board appointments. Nassau and Suffolk county executives also would get two appointments each, while New York City, a union representing 1,500 utility workers and a new 26-person stakeholder committee would each get one appointment. Each of the 13 board members would have a vote on LIPA matters.

Board members would for the first time receive compensation for their board roles — $25,000 a year — and each would serve a staggered five-year term. LIPA board members have not previously been paid.

The legislation would define the areas and level of expertise required of LIPA employees, executives and consultants, and ensure that employees remain entitled to existing pension benefits.

The legislation contemplates future discussions between LIPA and the state comptroller's office on the dollar threshold to require comptroller approval of utility contracts, a decision that would ultimately be left to the comptroller, a source said.

The plan foresees LIPA taking over operational control of the Long Island grid from PSEG on Jan. 1, 2026, a day after PSEG’s contract expires. Most of the $50 million to $80 million in annual savings from the plan would come from discontinuing the approximately $80 million paid in management fees and incentives to PSEG each year for a team of 19 managers. Most of the savings would go toward lowering rates, the commission has said, but LIPA is projected to see other operational savings by the transition. 

The plan involves transferring “ownership” of the operating entity behind the grid, called ServCo, to LIPA from PSEG. That entity employs around 1,400 unionized workers who under the plan would remain unionized members of Local 1049 of the International Brotherhood of Electrical Workers.

Patrick Guidice, business manager of the union, said Thursday that he had been briefed on the plan and was satisfied that it contained protections to maintain the wages, benefits and pensions he demanded in public briefings and meetings leading up to the final report. He had also asked that the union receive a voting seat on the board, a concession made late Thursday, two people familiar with the talks said.

PSEG has publicly opposed the plan, saying that the current public-private partnership has worked best for Long Island ratepayers, despite its failures during Tropical Storm Isaias and in recent performance report cards. As Newsday has reported, PSEG has spent hundreds of thousands of dollars lobbying against the proposal.

LIPA and its board have taken no official position on the plan, but some trustees have expressed support for it. One supporter was Mark Fischl, the board vice chairman whom Hochul this week removed from that position.

Hochul approved initial funding for the commission in 2022 but has taken no official position on the plan to convert LIPA to a fully public entity.

On Monday, she appointed three new members to LIPA’s board, including former Public Service Commissioner Tracey Edwards, and former National Grid/KeySpan executive vice president David Manning.

Katy Zielinski, a spokeswoman for Hochul, said in a statement, “The administration will review the final report and will review any legislation that passes both houses of the legislature.”

Lisa Tyson, executive director of the Long Island Progressive Coalition, and co-chair of an advisory committee on the future of LIPA, called Friday's vote "an important milestone on the path to public power." 

State Sen. Jack Martins (R-Old Westbury), who is not a member of the commission, on Friday released a statement calling the plan "nothing more than a backdoor, state takeover" of the local utility, in part, he said, because the four new board seats for Long Island are not enough. 

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

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