With major contracts for the utility's power and grid management being negotiated or changing hands in coming months, Cuomo's office is seizing a chance to make changes and a "better, quicker, smaller" LIPA is in the works, the officials said. One said changes could be announced before summer's end.
LIPA officials declined to comment Wednesday.
Goal: A leaner utility
"The bottom line is that LIPA has become bloated and expanded far beyond the job it's supposed to do," said an administration official. "The governor believes that LIPA should be returned to its core mission in order to reduce costs for ratepayers. That means drastically reforming the current way it does business."
While the new formation of LIPA is a work in progress, two people familiar with discussions about LIPA said the authority could be reduced to a holding company, which would manage contracts, the debt and legal matters.
Under such a scenario, PSEG, the New Jersey company that won the bidding to manage LIPA's electric grid starting in 2014, would be the outward face of LIPA, while other state agencies, such as the New York State Energy Research and Development Agency and the New York Power Authority, could take on renewable energy and power purchasing decisions.
"Now's the opportunity to put the genie back in the bottle," said a former LIPA official. "You could really downsize LIPA to financial and legal departments."
Last in satisfaction
LIPA, which started with around 20 employees in 1998 after it took over the assets of the former Long Island Lighting Co., has grown to more than 100 employees. Most of its work is done by contractor National Grid, which manages the electrical grid, and dozens of other smaller contractors.
State Sen. Kenneth LaValle (R-Port Jefferson) said he would support changes by the governor's office. LaValle said he's been particularly exasperated in recent months to read of revelations of new power plants being considered by LIPA, even as the fate of existing plants remains uncertain. LIPA last month also fell to last in J.D. Power and Associates' customer satisfaction survey for major U.S. utilities.
"They [LIPA] have reached a point right now of being so erratic and unreliable that I'm not sure it's in the best interests of the public the way they are framed right now that they should continue," he said.
LIPA has been negotiating with National Grid for an extension or renewal of the contract to purchase power from National Grid's 15 existing plants on Long Island. Newsday has reported that LIPA could add new gas-fired plants in Shoreham, Kings Park and Yaphank, and possibly a wind farm, among others.
LIPA is expected to include the option to repower the National Grid plants in the pending contract.
LaValle would prefer that the big three plants -- in Northport, Port Jefferson and Island Park -- be modernized rather than be replaced. LaValle said he has communicated his concerns to the governor's office.
New energy options
Cuomo is in the process of reviewing a state Energy Highway project that could provide vast new sources of energy for the downstate region, and Long Island projects are on that agenda. Among the proposals is one to repower the Northport plant.
LaValle said he would prefer to leave any future decisions about Long Island power plants in Cuomo's hands. "I have great faith in the governor," he said.
One of the officials close to Cuomo suggested a new LIPA may have less autonomy to make those decisions. LIPA "will be changed and significantly scaled down," said the source, who requested anonymity because he wasn't authorized to speak for the governor. The changes could come in the next month or two, the source said.
Not everyone believes the time is right for drastic changes at LIPA. State Assemb. Robert Sweeney (D-Lindenhurst), who last year worked with LaValle and Cuomo on a bill that improved LIPA oversight, pointed to ongoing audits of LIPA being undertaken by the state inspector general and for the Public Service Commission in saying drastic reform may be premature.
"It's probably not a bad idea to see the results of the investigation and audits before making more permanent decisions that have to be changed down the road," Sweeney said.