Catell: Rethinking how LI gets electricity

Bob Catell, former chief executive of KeySpan, is chairman of the Advanced Energy Research and Technology Center at Stony Brook University.

Each day seems to bring another articulation of the challenges of the Long Island Power Authority. Long Islanders are blessed with a superb quality of life, but our businesses and residents face some of the highest electric rates in the nation.

Earlier this month, State Sen. Kenneth LaValle (R-Port Jefferson) offered legislation to sell LIPA to the New York Power Authority. On the same day, Nassau Comptroller George Maragos questioned LIPA's Neptune power cable from New Jersey, with its initial payments in lieu of taxes of only $200,000 per year -- compared with the $8.9 million in taxes LIPA would pay if the cable were assessed on its value.

Last week, the Town of Huntington announced it is suing LIPA and National Grid over efforts to reduce the tax assessments on the Northport power plant.

And Gov. Andrew M. Cuomo has called for an investigation into LIPA's operating decisions, seeking more transparency in its balance sheet and costs to consumers.

The governor can do more. There are two vacancies on the LIPA board, and he should fill them with people who know the energy industry. LIPA's board is already populated by thoughtful, caring individuals who are all respected in their fields. But those fields include real estate, accounting, not-for-profits, finance and law. The issues now before us call for energy-utility professionals who can properly assess the needs of the authority in an increasingly complex and challenging environment.

LIPA, a constant focus of media and political attention, has spared little expense when it comes to investing in its system -- transmission and distribution upgrades, new substations, switch gear, and system management tools -- or in storm preparation and storm response. For those who criticize the $34 million spent last year to get ready for Hurricane Earl, whose wrath didn't ultimately materialize here, just look at how Mayor Michael Bloomberg was treated after 20 inches of snow fell on New York City the day after Christmas.

But as a government entity providing a monopoly service, LIPA operates in a politically charged environment that often drives decisions based on factors that have little to do with prudent utility practice. It's time for the P in LIPA to reflect more Power and less Politics.

Long Island has a unique makeup: an engaged public, engaged local media and engaged political leadership, all focused on current and future public services. That makes it hard, but LIPA needs to lengthen its planning horizon beyond the next news or election cycle.

It appears that in the recent past, LIPA may have cushioned Long Island consumers from higher rates for generating fuel at the expense of paying down the authority's nearly $7 billion in debt flowing in part from the failed Shoreham nuclear plant. Long Island needs a long-range plan that deals with its aging and less-efficient power plants, one that sets a course to retire that debt and brings us to a point where LIPA is no longer a drag on Long Island's economy.

To do that, LIPA has to operate as a business. That means making cost-effective investments to assure a long-term competitive future for Long Island.

Every political leader and utility in America wants to achieve the same thing: Prepare for a lower-carbon future by using less energy, while maintaining top reliability and lowering costs to consumers. That challenge requires a laser focus, as well as research and innovation.

But LIPA has become a political football, distracted from the best business decisions both in utility operations and future planning. The only constant has been a group of dedicated workers who have kept the lights on every day, rain, shine or storm.

LIPA's 1998 agreement under which KeySpan and then National Grid operated the electrical system, has functioned reasonably well.

But it is up for renewal in 2013, and every option must be on the table. That includes privatization.

It may seem like the cost advantages of municipal ownership are substantial when compared with privatization. Capital is less expensive and there are no shareholder returns to pay. But in my experience, those advantages can be exceeded by efficiency gains and other creative initiatives that would ensure excellent service and customer savings over the long haul.

In the event of privatization, a small organization would remain to manage and pay down the debt, but the LIPA operating group and its consultants would not be necessary. The comprehensive regulatory oversight of the Public Service Commission would guarantee that service levels would meet a high industry standard, but costs would be contained in an investor-owned enterprise

With professional leadership accountable to both shareholders and regulators, the decision-making process would be more transparent, not less, and over time Long Island ratepayers could see the savings a business focus can produce.

There's no avoiding the fact that if Long Island is hit by a major storm, we will lose power. We love our big trees, and the cost of burying the transmission and distribution lines -- billions of dollars -- is prohibitive. Whatever the outcome, once all the options are reviewed, professional Long Island crews will do their best, aided by our neighboring utilities when called to assist.

But we need to know that we are getting the best service possible at a reasonable price, with the right decisions about our future environment and energy use.

Long Island energy costs hamper the economy and contribute to our overall high cost of living. It's time to ensure we have the most efficient energy system, one that will maintain LIPA's record of reliability while lowering costs, complexity and environmental impact.

It's time to sort this out once and for all.