Big changes are coming not only in the management of the Long Island electric system but in the way the state regulates how well the utility that runs it is doing the job.
In a briefing last week aimed primarily at dissecting the Long Island Power Authority's performance during superstorm Sandy, Gov. Andrew M. Cuomo's Moreland Commission recommended increased staffing, new enforcement powers and stiffer penalties at the Public Service Commission, which oversees state utilities. It called the agency a "weak, ineffective, toothless tiger."
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"The Public Service Commission lacks a good deal of power and the ability for effective oversight," said commission co-chairman Robert Abrams. "It's charged with overseeing New York utility companies but lacks the wherewithal to do an effective job."
The Cuomo administration since last summer has been promising dramatic reform at LIPA, including privatizing the electric grid and returning the authority to its "holding company" roots. The effort took on heightened urgency in the wake of Sandy, which resulted in around 1 million outages.
Cuomo took LIPA to task for poor communication and coordination during the storm and empaneled the Moreland Commission to identify the problems and recommend solutions. The PSC review was part of that.
Any role at all for the PSC in overseeing the Long Island electric system would mark a big change for ratepayers, who haven't had a state-run regulator for 15 years, because LIPA never came under PSC jurisdiction.
LIPA's predecessor, the Long Island Lighting Co., was PSC-regulated, but rates skyrocketed during that tenure. The PSC also regulates National Grid's natural gas business on Long Island and throughout the state. National Grid, which operates the Long Island electric grid under a $224 million contract to LIPA, does fall under PSC authority for its electric operations upstate.
Oversight by LIPA trustees
LIPA trustees now play that oversight role -- without the hundreds of engineers, auditors and lawyers of the Department of Public Service, which is the 500-employee administrative arm of the PSC. Attempts to bring LIPA under PSC jurisdiction, even just for rate increases, were repeatedly nixed by several successive governors, including Cuomo in legislation passed last year, because of fears it would lower LIPA's bond rating.
"I have always supported PSC oversight of LIPA," said LIPA trustee Neal Lewis. "There is a cost associated with that oversight however."
Bringing the PSC to Long Island would come with a so-called assessment line item on Long Island customer bills. It covers the cost of regulating LIPA, including staffing and audits. Given LIPA's size, that could add $12 million a year to the cost of running the Long Island grid, experts said. That amounts to less than $1 a month for most residential customers.
In exchange, Long Island consumers would get an independent body to officially lodge complaints against their power company -- complaints that are logged and could result in fines. Now, LIPA customers either complain to LIPA itself about their service or file complaints with the state Consumer Protection division, which essentially mediates disputes but has no authority over LIPA.
The Moreland Commission recommended scrapping a $100,000-a-day limit on penalties for poorly performing utilities and instead turning to fines based on a percentage of a utility's revenue -- upward of $2 million a day for big utilities such as Con Edison.
It also recommended creating an enforcement/investigative arm of the PSC to make sure utilities are implementing actions the PSC ordered. That would require staffing up by as much as 20 new employees.
'The PSC on steroids'
Other recommendations are to conduct regular audits of utilities' management and operations, monitor storm preparedness and storm restoration performance, and impose fines and other sanctions on those who fail to meet the standards.
"We're basically recommending putting the PSC on steroids," said Benjamin Lawsky, the commission's co-chairman.
The new powers for the PSC would be brought to bear only against power companies. The other industries the PSC oversees -- communications, water, natural gas and steam -- will not be affected, Cuomo said.
It's unclear how the agency would apply those new standards. "We will review the commission's report and work to address its concerns regarding oversight in order to protect customers," PSC spokesman James Denn said in a statement.
Gerald Norlander, executive director of the Public Utility Law Project, a watchdog group, said changes have been needed at the PSC for years. "I think it's good that more attention is being placed on the commission and on its powers," he said.
Norlander said fines threatened against poor-performing utilities rarely serve as deterrents and that a PSC enforcement arm would go a long way toward changing utility practices.