LIPA eyeing future options even before lawsuit against PSEG

Even before LIPA escalated its dispute with PSEG Long Island to the courts with a lawsuit filed Wednesday, the authority had begun a review of its future options for operating the electric utility — with or without PSEG.

LIPA and its board plan to study multiple options after a LIPA task force found a series of missteps by PSEG in the aftermath of Tropical Storm Isaias. LIPA's contract with PSEG expires in 2025; the state has recommended LIPA not renew it, and consider terminating it early.

LIPA has four broad choices if it decides PSEG is not capable of fulfilling its obligations under the nearly $80 million-a-year contract, or isn't moving fast enough on fixes..

• Contract out: LIPA could contract out large portions of the work, including information technology and telecom, to third-party contractors.
• Seek a new operator: LIPA could put the entire grid management contract out to bid, as it did when it felt National Grid reacted inadequately to Superstorm Sandy — and PSEG was awarded the contract.
• Go public: The utility could move to full municipalization, making the 2,000-plus unionized PSEG workers municipal employees. LIPA trustee Matthew Cordaro has said it would remove the current profit motive that PSEG has, while keeping LIPA eligible for federal disaster relief funds and tax-free debt.
• Go private: LIPA could fully privatize the utility, selling the system to the highest bidder. This would put it fully under the jurisdiction of the state Public Service Commission, like all other investor-owned utilities in the state. LIPA has considered this move in the past, but rejected it because of loss of federal emergency-fund eligibility.

Lastly, LIPA could continue to work with PSEG and amend the contract to force the New Jersey-based company to meet more stringent new contract terms. PSEG, in a statement about the options, said the company believes the "current public-private partnership is the best option for Long Island customers."

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

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