LIPA faces another crossroads

When Gov. Mario Cuomo and Long Island lawmakers cobbled together the Long Island Power Authority from the wreckage of the Shoreham nuclear power plant debacle, they bailed out Long Island Lighting Co. shareholders and bondholders. Their purpose was to assure that the nuclear plant would never operate.

Designing the perfect power authority was not the priority in 1998. That lack of focus on the best way to operate a power system for Long Islanders reappeared each time an emergency forced the evolution of LIPA, shortchanging real study.

The embattled new entity was immediately saddled with more than $6 billion in debt. LIPA, with thousands of employees and a transmission, distribution and organizational system inherited from LILCO, was run in a way to keep problems from politicians' doors. Maintenance, upgrades and tree-trimming went undone, debt increased, and rate increases were pushed off.

When Superstorm Sandy came in 2012, those structural and managerial flaws were exposed, rocking the system and the authority. 

Outages lasted weeks while communication with customers was nil. More than 6,000 contract workers brought in for the storm were barely supervised. Archaic systems had managers handing workers slips of paper with outage addresses in late-night parking lot rendezvous.

The fallout created pressure to make LIPA less bureaucratic, more private-sector efficient, and no longer obviously identifiable as being controlled by the governor and legislature. The LIPA Reform Act of 2013 was, like the 1998 plan, a reaction to disaster, not a blueprint for excellence.

Gov. Andrew M. Cuomo wanted “LIPA” off the trucks. The new vendor picked to replace National Grid before Sandy hit, PSEG, sped up its takeover and increased its scope at the behest of Cuomo. 

And for seven years of mostly calm weather, that largely worked. Then Tropical Storm Isaias hit in 2020 and PSEG’s telephone and IT operations failed miserably, slowing response and enraging Long Islanders. LIPA had failed to oversee PSEG properly, and the contract governing the relationship was ineffective in inspiring good management.

Just as Sandy led to cries for more private-sector efficiency and a reduction in bureaucratic power, Isaias brought demands for full municipalization.

Mea culpas followed and the PSEG contract, which runs through 2025, was rewritten to better incentivize good performance.

But a “study” bill also passed in Albany as part of this year's budget, which aims to pave the way for full municipalization, was deceptively sold as a vehicle for discovering the right path.

The battle now is over what’s really needed: a legitimate study of the options, or just a push toward public power.

THE CASE

The bill's main proponents in the legislature are ardent supporters of public power, with no interest in a study of all options: privatization, improving the current hybrid model, or full municipalization. They argue that both the private model of LILCO and various hybrids have fallen short, because for-profit power is wrong for Long Island, and that LIPA, with thousands of employees at PSEG and just a few dozen at the authority, is essentially for-profit. PSEG makes about $80 million a year off a contract that provides 19 management employees. 

Bill supporters also say that the shortcomings of for-profit power are particularly glaring in the case of uniquely hybrid LIPA, whose rates and practices are not governed by the Public Service Commission. And, they argue, many public power companies do a good job. 

THE COUNTER

Those who want a full study of every option say leaping again without properly looking makes no sense. They include supporters of full privatization, who argue that lean, dynamic, for-profit power companies can spur innovation and create savings. 

There is currently no political will for privatization. But there is a desire, particularly in Albany, to determine whether a well-run hybrid version, with LIPA overseeing a for-profit manager, can work. Gov. Kathy Hochul and some Long Island legislators fear the return of the LIPA name on trucks and the likelihood that they will be blamed for its travails when the next storm hits.

No one wants to own this.

And many fear a fully public LIPA could become a haven for all the flaws of bureaucracy, patronage and politics.

OUR TAKE

Privatization has been considered thoroughly and has no significant support. Detractors say it has been talked to death, would cost Long Islanders a fortune when storms hit and federal bailouts are unavailable, and siphons profits from ratepayers.

Considering the possibility of a well-run hybrid that provides some market efficiencies but tempers them with long-term planning and focuses on the needs of ratepayers is necessary. 

On Long Island, we all know how poorly a multibillion-dollar operation run entirely by politicos can fare.

But a study that analyzes multiple options is also necessary. Supporters of municipalization are making many claims: lower rates, better reliability, and maximum use of renewables. Let's see the proof that all of that is possible.

LIPA has repeatedly stumbled because every change was an improvisation in response to an emergency.

This time, for the first time, LIPA’s form and future must be determined after all the data is analyzed and shaped by what's best for Long Island.