LIPA: Cost to fix PSEG storm systems that crashed during Tropical Storm Isaias could be up to $30 million

PSEG Long Island is expected to spend up to $30 million to fix telephone and computer systems that crashed during Tropical Storm Isaias in August, LIPA reported during a board meeting Wednesday in which ratepayer groups urged LIPA to drop the grid operator and move to a fully public model.

During the meeting to discuss the utility’s future options, LIPA officials reported that PSEG already has spent around $9.71 million from LIPA’s annual operations and long-term capital budgets to attempt to fix the systems.

LIPA officials also expressed concern that, while elements of PSEG's storm systems have improved, not all are fully operational. Worse, said LIPA chief information officer Mujib Lodhi, PSEG is scheduled to introduce a new version of an outage computer system in May, weeks ahead of the start of storm season.

PSEG will roll out the new system "when the timing is appropriate," PSEG spokeswoman Ashley Chauvin said.

During and after Isaias, more than 535,000 customers saw some 645,000 outages, and many were frustrated for a week or more trying to get restoration times and responses from PSEG.

The costs for the telephone and computer systems fixes are coming from LIPA’s current and long-term budgets, LIPA said. Responding to Isaias, including hiring crews, cost more than $300 million, LIPA said, and 75% of that is expected to be reimbursed from federal disaster funds. LIPA's short- and long-term budget costs are largely paid by ratepayers.

Most utility costs paid by ratepayers

LIPA didn't say how that $30 million cost for fixing the systems would be paid for but nearly all utility costs come from ratepayers, and every $34 million in expenses results in a roughly 1% hike in customer bills.

Asked if PSEG corporate was covering the cost of any of the repairs, Chauvin said the company was enacting fixes requested by LIPA, its board and those PSEG itself has identified and all are "being charged in accordance with" its LIPA contract, which calls for the expenses to be passed through to customers.

This February and March alone, LIPA reported, PSEG spent an average $3.31 million each month fixing the systems, which failed at the onset of the storm, causing 1 million busy signals and more than 300,000 lost text messages, among other problems. Lodhi said at the current run rate, the fixes could cost $20 million to $30 million.

Gaughran: PSEG stockholders should pay

State Sen. Jim Gaughran (D-Northport) said ratepayers should not be stuck with the repair bill for PSEG’s systems.

"I think that money should be paid by PSEG stockholders," he said Wednesday.

On Wednesday, Gaughran introduced a bill in the Senate that would mandate PSEG or its successor pass an annual stress test on the outage management computer systems. It would face penalties for failing the test, and customers would be entitled to rebates so they don’t foot that bill, either, Gaughran said.

LIPA reviewing its options

Discussion of the costs topped a meeting in which LIPA reviewed options for its future: hiring a new contractor, attempting to negotiate a new contract with PSEG, and becoming a fully public utility. A fourth option, selling the utility to an outside entity, was dismissed as too costly to ratepayers.

LIPA chief Tom Falcone recommended, and the board approved, LIPA’s decision to issue a request for information to gauge whether outside service providers would bid to replace PSEG. LIPA continues to review the fully public model, also known as municipalization, in which LIPA would run the system and take on management of 2,500 employees itself, for savings of more than $800 million over a decade. LIPA pays PSEG around $80 million a year for around 20 top PSEG executives and managers to operate it now.

Chauvin said PSEG "continues to maintain that a public-private partnership is the best option for Long Island customers."

Groups air concerns at session

Speakers during the public comment session expressed frustration that LIPA and its board would prolong the process of evaluating its options and not begin the move to a fully public power model now. LIPA also plans to hold public comment sessions at the end of next month.

Calling the reasons to shift to a fully public utility "clear" and "urgent," Michael Menser, a Nassau resident and professor of the City University of New York, said, "We don’t even need to make the case for a public option at this point — it’s the only option left," he said.

Fred Harrison, a Merrick resident representing the activist group Food and Water Watch, said he was "frustrated and a bit bewildered" that LIPA would spend months more entertaining potential interest from other utilities or negotiating with PSEG.

"I have heard nothing that would lead me to think that saving money by moving to a nonprofit [fully public] system would be a bad thing for ratepayers," he said.

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

Mark Harrington, a Newsday reporter since 1999, covers energy, wineries, Indian affairs and fisheries.