Editorial: Pull the plug on LIPA

LIPA was a badly designed hybrid, its structural LIPA was a badly designed hybrid, its structural flaws only compounded by its politically centric management over the years. It's time to pull the plug. Photo Credit: Janet Hamlin

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Powerless to help us after Sandy, the Long Island Power Authority should be rendered permanently powerless.

It is a power company that owns no electrical generation, operates no transmission or distribution, and can't communicate with its customers. It has been deficient in achieving its stated goal: providing Long Islanders with inexpensive electricity.

LIPA, born out of politics, is likely to die from it. The death knell is welcome.

Sandy brought all this dysfunction to a head, highlighting and exposing the flaws in this unique creation of New York State. The public authority was supposed to solve the problems created by the failed Shoreham nuclear plant. It's time to return it to the private sector as a regulated utility.

Surveys show LIPA customers are often the unhappiest in the nation, while their electric bills are among the highest.

LIPA couldn't fulfill its mission of containing costs while satisfying the needs of elected officials, who stopped the closing of antiquated generation plants, blocked the utility from challenging its property-tax assessments and extorted all sorts of benefits for local communities before any project could be sited. Politics compromised its functioning. The only beneficiaries were the lucky few who glommed on to its highly paid patronage jobs or got the many lucrative contracts for consultants, lawyers and projects that created or delivered the juice.

For those who were suffering in the dark -- cold and powerless for two weeks -- it's difficult to accept that the pace of restoration was good by industry standards for such a punishing weather event, particularly when you consider the nor'easter that followed Sandy. LIPA -- or rather National Grid, the for-profit company that does nearly all the utility work we associate with LIPA -- performed as well as or better than other power companies in the region facing similar challenges.

But it was LIPA that failed to help us deal with the storm's consequences by not providing any meaningful time frame for restoration. It was LIPA that locked angry customers out of its offices, had to take down its online outage map because it was so inaccurate and, in the age of tablets and smartphones, was issuing handwritten work orders and paper maps to direct out-of-state crews to trouble spots.

That's incompetence, but it's where incompetence and politics meet that the authority really finds trouble.

Under relentless pressure from Gov. Andrew M. Cuomo and other state and local officials that began with the cyclone's winds, National Grid, which ordinarily has 200 linemen on duty, brought in another 6,000, plus thousands more for related cleanup tasks. It was far more than the authority could organize, dispatch or use. There was no comprehensive disaster plan in place, one that truly provided for coordination with local governments, to most efficiently use the assistance. The excessive staffing will cost hundreds of millions of dollars that may not be totally recouped from the federal government.

Wasted money, inefficiency, poor communication, poor planning and problems brought on by politics: That's LIPA in a nutshell.

 

LIPA is a creation of the tortured reasoning of Albany, produced from the inability of the Long Island Lighting Co. to get the Shoreham nuclear plant into service and to recoup the money it had invested there. The Shoreham plant was first proposed by LILCO in 1965, with a $70-million price tag attached. By 1989, the cost had swelled to $6 billion and public opinion had turned against the project.

Disasters at Three Mile Island in 1979 and Chernobyl in 1986, evacuation fears, cracked emergency generators, Newsday reports of generally shoddy construction and a slow response to Hurricane Gloria had soured the public on Shoreham and LILCO's management of it. And a callous culture at LILCO, exemplified by chief executive William Catacosinos' refusal to return from a European vacation as Long Island went without power, only made matters worse.

Over time, a deal spun out that brought LIPA into being. It allowed borrowing at municipal rates, shuttered Shoreham forever, and generously bought out LILCO's shareholders and bondholders, to the tune of billions of dollars. And it left Long Island's power customers saddled with the debt for it all. Almost 25 years later, that $6-billion note hasn't shrunk appreciably.

Once the oversight for the delivery of electricity was in the hands of a state authority, the opportunities for patronage, self-promotion and pandering kicked into high gear. The debt has stayed high because LIPA borrowed more rather than take the politically unpopular route of raising rates, and wasted money on a hundred self-serving expenses in the process. Today, power on Long Island is generated, transmitted and distributed by National Grid, which is in the last year of a management contract that wasn't renewed. LIPA owns the wires and substations, but National Grid runs and services them. LIPA has the task of making good decisions about storm-proofing the system, trimming trees and installing the technology to track outages.

 

Undoing LIPA will be complicated, legally and operationally. In 2011, this page argued that the current contract with National Grid should have been extended one more year while a legitimate study on selling and privatizing the system was conducted. Instead, a bid from PSE&G of New Jersey for a 10-year contract starting in 2014 was accepted.

After two years of avoiding the shortcomings of LIPA, Gov. Andrew M. Cuomo has now invoked the state's investigative powers to find out what went wrong. That involves a lot more than looking at what happened in the days before and after Sandy hit, and the result should be more than a few trifling recommendations on how to handle storms and blizzards.

It must expose the structural flaws inherent in LIPA, making an irrefutable case for selling it to a for-profit company.

Electricity on Long Island must be run by utility professionals, who will make sound decisions based on rational self-interest and responsibility to their shareholders. That doesn't mean it will be perfect: Private utilities have flaws, too. Long Island's own experience with LILCO bears witness to that. Such a company would be subject to regulation by the state Public Service Commission, and the pressures applied to it, for profit rather than politics, would likely lead to better planning, management and communications.

The tricky but doable part is ensuring that payment to LIPA bondholders is guaranteed, and untangling the authority from the new contract with PSE&G. Let's put the system out to bid.

LIPA was a badly designed hybrid, its structural flaws only compounded by its politically centric management over the years. It's time to pull the plug.

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