FEMA audit eyes LIPA costs for Irene damage

LIPA chief Michael Hervey walks through Florence Street

LIPA chief Michael Hervey walks through Florence Street in Merrick, assessing damage after Tropical Storm Irene. (Aug. 31, 2011) (Credit: Howard Schnapp)

The Federal Emergency Management Agency is taking a fine-toothed comb to LIPA's request for reimbursement of $115 million in restoration costs following Tropical Storm Irene.

The unusual audit could add months to the time the Long Island Power Authority expects to see the payments to refill its coffers, and comes at a time of tightening cash flow at LIPA.

"We theoretically could get 100 checks for $1 million, and that's going be the problem in terms of management of the cash flow," LIPA chief financial officer Michael Taunton told trustees in a committee meeting last week.

LIPA initially requested $128 million from FEMA, but the agency has already challenged $13 million in storm receipts. LIPA spokesman Mark Gross said LIPA will resubmit those challenged invoices.

LIPA last year said the storm cost $177 million to remediate, and that it expected $133 million of that to be reimbursed by FEMA. On Friday, Gross said the $177 million was "an estimate," and that the cost was actually $170 million.

Most of Irene's costs were the expense of bringing in thousands of repair crews from outside the area for a week last August.

Last week, FEMA sent LIPA the first of what could be many relatively small payments: $12.7 million.

LIPA officials said FEMA auditors were taking the unusual tack of physically auditing locations all around Long Island to make certain repairs LIPA wants reimbursed were actually done.

"The upshot is that this is going to be a much more lengthy process than we originally anticipated," said LIPA controller Kenneth Kane.

On Friday, Sens. Charles Schumer and Kirsten Gillibrand and other U.S. lawmakers released a statement announcing the partial reimbursement, calling the amount "great news for Long Island."

Gross said LIPA believes that money "is just the first round of payments from FEMA. We still anticipate the $115 million that we have submitted vouchers for," will be paid.

Nevertheless, LIPA officials and an energy expert said the FEMA auditing tactic is highly unusual.

"The process seems to have taken a curve, in that they are having people walk down every circuit to review the damage and the repairs to the damage," Kane told trustees. "That's a lengthy process."

"I've never seen them do that any place," said Matthew Cordaro, chairman of the Suffolk Legislature's LIPA Oversight Committee and a former utility executive. "I have a suspicion it has to do with all the publicity" relating to improper charges to LIPA from National Grid during the past two years. "FEMA doesn't want to come up with egg on its face," Cordaro said.

FEMA officials did not immediately respond to requests for comment.

LIPA officials have made calls to state officials, including Gov. Andrew M. Cuomo's office and the Emergency Management Agency, to intercede on its behalf. Those efforts are ongoing, but officials said federal regulators are still likely to follow their course.

"At the end of the day, they're auditing types and they want to lay their eyes on it," LIPA chief operating officer Michael Hervey said of regulators scrutinizing the storm bills.

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