Comptroller skeptical on costs of privatizing LIPA

State Comptroller Thomas P. DiNapoli.

State Comptroller Thomas P. DiNapoli. (Credit: Newsday, 2012 / Audrey C. Tiernan )

The state comptroller's office has weighed in on the notion of LIPA as a private entity, telling a State Senate investigations panel that it has "serious ongoing issues" with LIPA's financial condition, while questioning the costs of going private.

Comptroller Thomas DiNapoli's office expressed concern about LIPA's nearly $7 billion debt, noting that it amounts to $6,000 per customer, while debt service costs 3 cents for every kilowatt hour billed.

As recently as January and December, according to a written statement submitted Feb. 27 to the Senate by Robert Ward, deputy comptroller for budget and policy analysis, the office "expressed concern" over LIPA's plan to increase its borrowing by more than $700 million in recent months, in part to pay bills of superstorm Sandy. It called on LIPA to "manage its financial resources in a manner that would minimize costs for ratepayers."


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While LIPA has worked to reduce the debt, "LIPA's outstanding debt and swap portfolios have serious implications with respect to the discussion of potential changes in the legal status of the authority or the transfer of its assets to a new owner," according to the Senate testimony.

"Unless a private purchaser could gain access to the tax-exempt market as a conduit borrower, new debt would be required to be taxable," the letter states.

Taxable debt generally has higher yields, translating to higher costs for ratepayers.

The comptroller quoted the Moreland Commission, a state panel investigating utilities' responses to recent storms, in noting that private ownership would result in "several hundred million dollars" in new costs to ratepayers. However, the commission has recommended privatization of the LIPA system.

The letter notes the benefit of public ownership in getting federal reimbursement for storm costs, and said it was "difficult to quantify" the potential savings the Moreland Commission projected could come from new synergies between LIPA and a private owner.

DiNapoli suggested creation of an "independent entity to provide a regular 'report card' " for any LIPA successor.

National Grid provides service performance reports to LIPA each month, including customer satisfaction grades that often put it at the bottom of national rankings.

"As we have said countless times, the governor will only support a plan that best protects ratepayers and keeps rates affordable both short- and long-term," Matthew Wing, spokesman for Gov. Andrew M. Cuomo, said Wednesday.

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