Cuomo aide to 'engage' LI leaders on LIPA

A Long Island Power Authority truck is among

A Long Island Power Authority truck is among those arriving to make repairs in Belle Harbor a couple of weeks after superstorm Sandy. (Nov. 12, 2012) (Credit: AP)

Gov. Andrew M. Cuomo will deploy a top aide to discuss "the best option" for LIPA with Long Islanders as lingering questions about his plan to privatize the utility slow the proposal's momentum.

An administration source said Wednesday that Cuomo is assigning Larry Schwartz, secretary to the governor, "to engage elected officials and business and community leaders to form a consensus around the best option for LIPA."

The administration "does not want this to be a top-down process," the source added.

The move signaled a slowing down of a privatization plan unveiled by the governor just two weeks ago during his State of the State address. Top lawmakers in the Assembly, including newly named Energy Committee chairwoman Amy Paulin (D-Scarsdale), said they had been expecting Cuomo to submit a budget amendment on privatization as soon as this week.

Earlier this month, Schwartz said that the administration would be moving forward "aggressively" to reform the utility, and he was critical of a plan to municipalize the Long Island Power Authority as enlarging a "bureaucracy."

The privatization plan is still an option, the source emphasized. The plan included selling LIPA's assets to a private company, using proceeds to pay down part of LIPA's $6.9 billion debt, borrowing to pay the rest, and freezing rates for three to five years. It was the option recommended by a special commission empaneled by Cuomo to overhaul Long Island's electric system in the aftermath of superstorm Sandy.

But since then, a number of Long Island officials, business leaders and Wall Street rating agencies have expressed skepticism about the plan, saying privatization could drive up electricity rates.

They note the Moreland Commission's plan would require new borrowing with debt that may not be tax-exempt -- and which would be paid back over decades -- and require the state to back newly issued bonds. Existing bonds would incur hundreds of millions of dollars in early retirement fees and other penalties, they said, and LIPA's new owner would have to pay taxes on its income (LIPA does not). Fitch Ratings said the privatization of LIPA "could be extremely expensive and may not result in the ratepayer benefits projected."

Wednesday night, Long Island lawmakers, pointing to those questions, welcomed the chance for continued discussions.

"I think it's pretty clear the administration understands there are reservations and concerns among a wide group of people in the public and private sector about what privatization means, given that just about every study of privatization says it will cost us a lot more," said Assemb. Robert Sweeney (D-Lindenhurst).

State Sen. Kenneth LaValle (R-Port Jefferson), noting a Senate study of privatizing LIPA had only just begun, said, "We need an analysis of what those words mean and how they translate to the ratepayer."

He praised Cuomo's openness to discussing other options.

Both LaValle and Sweeney said they welcomed the chance to argue for putting LIPA fully under the Public Service Commission's oversight, especially now that Cuomo has announced a plan to invigorate the PSC with greater investigative and enforcement powers, and bigger penalties for failure.

LIPA is already moving to transition control of the electric grid to contractor PSEG of New Jersey next January. Cuomo's administration approved that plan, which was announced in December 2011.LaValle said he'd favor any plan that put LIPA under PSC review. "That's what I wanted done in the very beginning," he said. "I think they should be treated like every other utility."

The administration source didn't rule out any options. Schwartz "will be discussing a range of options with local stakeholders and ratepayers," the source said. "Our priority is creating a system that keeps rates affordable while improving customer service, utility performance,and disaster readiness and response operations."

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