Long Island lawmakers met Monday night in Albany with a top aide to Gov. Andrew M. Cuomo and financial consultants to hear the case for privatizing LIPA, the first in a series of briefings on the future of the troubled utility.
The 90-minute discussion started what is expected to be a lively debate on the prospect of selling LIPA assets to a private company, observers said.
Larry Schwartz, secretary to the governor, and consultants from the financial firm Lazard Ltd. made the case for privatization, while lawmakers pushed back, asking why a fully public LIPA could not work, according to a lawmaker at the meeting.
"I would say there was a rather robust discussion with lots of skepticism from the Assembly with regard to privatization," said Assemb. Fred Thiele (I-Sag Harbor). Cuomo's staff "presented what their privatization option was, then all of us told them what our reservations were."
Thiele said he expects more meetings, but said Cuomo's staff appears intent on finalizing a plan before the legislative session ends in June. Legislation will be required to complete the transaction, Cuomo has said. Richard Azzopardi, a spokesman for Cuomo, didn't return several calls and a message seeking comment. Last week, an administration source said Schwartz would "engage elected officials, and business and community leaders to form a consensus around the best option for LIPA."
The campaign comes amid a chorus of skepticism that greeted the privatization plan after Cuomo's State of the State address last month. Lawmakers, business leaders and Wall Street have questioned the math that would allow Cuomo to freeze Long Island rates and keep them stable if the utility were run by a for-profit corporation.
Cuomo has said privatization would come with a three-year rate freeze, a plan to pay off LIPA's $7 billion debt, and a better-run company. But observers say costs could increase if LIPA were to lose its ability to issue tax-exempt debt, and the new owner would have to pay federal income taxes, dividends, bond fees and penalties. It would also be exempt from federal emergency storm restoration costs.
LIPA trustees' finance and audit committee was briefed on the privatization plan by New York Power Authority chief executive Gil Quiniones on Jan. 24, LIPA trustees said. LIPA chairman Larry Waldman said he has asked the administration to have Schwartz brief trustees.
"The Moreland Commission made their recommendation," Waldman said of the Cuomo-appointed group's view that privatizing LIPA was the best option.
Trustee Neal Lewis said he's not convinced privatization is the way to go and he favors keeping LIPA public but giving it greater control over incoming contractor PSEG.
Schwartz and Cuomo have criticized the fully public model, saying it would make LIPA's failed model larger and more bureaucratic.
Assemb. Kevin Cahill (D-Kingston), the outgoing chairman of the assembly Energy Committee, in a letter to fellow lawmakers on Jan. 24, pointed to several studies that showed privatization of LIPA could raise rates from 6 percent to 20 percent.