LIA formally opposes Cuomo plan to privatize LIPA

LIPA crews work on a pole leaning over LIPA crews work on a pole leaning over the westbound LIRR tracks just west of the Hickville station in Hicksville. (Jan. 31, 2013) Photo Credit: Howard Schnapp

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The Long Island Association, the region's largest business group, has formally recommended against a plan by Gov. Andrew M. Cuomo to sell the Long Island Power Authority's assets to a private company.

In a carefully worded resolution Wednesday, the LIA's 60-member board unanimously said it could not recommend Cuomo's plan, though it commended him for considering it. Instead, the LIA advised that LIPA move forward with an already planned transition for PSEG of New Jersey to take over management of the LIPA system in January, with a series of recommendations to improve it and LIPA's structure.

"If a compelling case is made for privatization in the future, we could be receptive to it," LIA president Kevin Law, a former LIPA chief, said. "We're not against privatization forever."

Many Long Island political leaders and organizations have expressed concerns about the privatization plan since it was announced in January, fearing that it could lead to higher electric rates. Some have called for either making LIPA a fully public utility or improving the existing public-private model.

The LIA's decision comes as LIPA trustees Thursday are expected to turn to ratepayers to pay some costs -- around $80 million -- from superstorm Sandy. LIPA said the recovery, starting in 2014, will amount to around 30 cents a month for an average residential ratepayer and will help it "maintain its financial stability and strong credit rating." LIPA expects most of the $900 million tab for Sandy to be picked up by federal disaster funds, but around 10 percent of the costs may not be covered.

LIPA trustees also are expected to consider scrapping a storm outage management system it has been working on for more than a year in favor of a new one from PSEG of New Jersey, which is scheduled to take over operations of the Long Island grid next year.

On the privatization issue, the LIA's recommendations included: amending the contract with PSEG to allow it to take control of LIPA's system for storm preparation and response; developing an aggressive debt-retirement plan that could include securitization; streamlining LIPA and its trustee board; and subjecting LIPA rates to Public Service Commission review.

"We hope we're listened to, but it's the Albany decision-makers who will ultimately decide LIPA's fate," Law said.

Matthew Wing, a spokesman for Cuomo, said the administration continues to consider "all options" for LIPA, not just privatization, and he stressed that the "status quo is untenable."

"We appreciate the feedback and will continue to work with the business community and other stakeholders as we consider the options," Wing said.

In other matters, LIPA spokesman Mark Gross confirmed that trustees Thursday will be discussing a "plan for rate recovery" as well as the outage management system. Newsday last month reported LIPA already plans to hike average residential bills by around $13 this month because of higher fuel costs in January.

LIPA said the recovery of the $80 million in storm costs would occur over time starting with its 2014 budget. "This isn't a rate increase, but it will be factored into next year's budget," a LIPA official said.

Opting for the PSEG outage management system could add tens of millions of dollars in costs to the $3.8 billion, 10-year contract with PSEG. PSEG spokesman Paul Rosengren confirmed the company's system is "one of the systems under consideration."

LIPA also will vote to name trustee Peter Tully vice chairman.

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