Pols finalizing LIPA restructuring bill

The fate of the Long Island Power Authority, the public face and driving force behind the region's energy planning and supply for the past 15 years, will be decided in Albany this week as lawmakers scramble to rework a LIPA restructuring bill to please all parties.

If Gov. Andrew M. Cuomo has his way, a markup bill to shrink LIPA to a shell of its current self, and turn nearly full control of the Island electric grid over to PSEG of New Jersey, could be brought to state legislators as soon as Monday. They would have until Thursday -- the scheduled end of the session -- to pass it or leave LIPA as it is.

Larry Schwartz, secretary to the governor, on Friday said he was "confident that LIPA as we know it will no longer exist, and Long Islanders will have a new and better utility."


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Lawmakers say the bill has a real chance of passing.

"We're working very hard to try and make it happen," said state Sen. Kenneth LaValle (R-Port Jefferson). "And at same time, there are always members' issues that need to be resolved before we move forward. Our delegation's issues need to be fixed if we are going to do a bill by the end of the session and we're working very hard to achieve that."

Among the issues that remain on the table: clarifying the oversight role of the state comptroller in approving the $4 billion-plus PSEG contract, making sure Long Island's energy efficiency and renewable energy programs are continued, and exploring ways to ensure that some antiquated power plants are overhauled rather than retired, lawmakers said.

Talks were to continue over the weekend, according to an administration official, so a bill could be printed by Monday night and age the required three days before a vote on Thursday.

"We're listening," the official said. "To the extent people come up with reasonable ideas, we're keeping an open mind and we're moving forward and with productive talks."

 

Taxes on LIPA properties

One major sticking point will be how, or if, the bill would address the hundreds of millions of dollars LIPA pays each year in taxes on its own properties, such as substations, and National Grid plants. Last week Huntington Town leaders circulated a petition requesting that any LIPA legislation include a provision to drop LIPA's tax challenges to power plant assessments, including the Northport power station, for which LIPA pays $73 million annually.

But Huntington is pitted against powerful business groups such as the Long Island Association, which called tax reduction on plants and properties its top priority for the bill.

"There has to be a significant reduction in property taxes for all LIPA properties and the generation plants before a cap is put in place," LIA president Kevin Law said Friday, referring to the 2 percent cap the draft legislation called for on LIPA property taxes.

The Cuomo administration official said, "We're having conversations to resolve the tax issue" on the four power plants, including Northport, Port Jefferson and Island Park. The official also said, "The issue of repowering [modernizing older plants] has been raised. We're not opposed to it if it's in the best interest of Long Island ratepayers."

 

Structure, oversight

Passage of the bill would set in motion a series of moves to dismantle the authority by year's end, leaving it with just 20 employees from the current 90 to handle primarily administrative functions. PSEG, which was already set to take over management of most of LIPA operations in January, would increase those duties to include budgeting, power management and planning, storm preparedness and green-energy programs. The PSEG brand would replace the LIPA name on trucks, buildings and bills starting in January.

LIPA would create a separate bonding authority to securitize around half of its $7 billion debt at considerably more favorable terms for investors and lower LIPA's borrowing costs -- for an expected $30 million in annual savings.

Under Cuomo's original proposal, the state comptroller would have no authority to review a pending $4 billion-plus PSEG contract, one of LIPA's largest. "It's one of our major sticking points," said Jeannie Appleman, coordinator for Long Island Congregations, Associations and Networks, an activist group.

The administration official said talks included ways to provide a "little more robust oversight" of the PSEG contract.

LIPA trustees would be asked to approve the pact by December, when they would be disbanded and replaced by a new five-member board. Some, including the LIA and LIPA's chairman, are suggesting the board be replaced sooner, perhaps even next month.

Some Long Island activists have been urging lawmakers to slow down, saying the decision is too important to rush it through before the end of this legislative session. Lawmakers saw first drafts of the bill only one month ago.

Neal Lewis, executive director of Molloy College's Sustainability Institute and a LIPA trustee, said the law was "full of gaps and ambiguities" and should be delayed.

One big issue that remains unresolved is whether the Internal Revenue Service will allow LIPA to continue issuing tax-exempt debt under its new holding company role.

But the original contract envisioned a larger role for LIPA in monitoring PSEG, with more input on budgeting and oversight than LIPA ever had before. LIPA had been staffing up for that role when Cuomo, last year, declared LIPA would be "abolished."

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