Moody's cuts LIPA outlook to negative

Moody's Investor Service cut its outlook for Long Island Power Authority bonds to negative from stable, citing LIPA's "consistently weak cash flow" and the prospect of regulatory oversight.

State lawmakers last month passed legislation requiring a Public Service Commission review of all LIPA rate increases of 2.5 percent and above over a one-year period. The bill awaits Gov. Andrew M. Cuomo's signature.

"Although we believe the governor may ultimately veto this legislation, we also believe the pressure for additional independent oversight of LIPA will persist, which could ultimately interfere with the LIPA board's ability to implement rate changes in a judicious and timely manner," Moody's said.

Joshua Vlasto, a Cuomo spokesman, said the governor's office was "reviewing" the legislation.

Despite the negative outlook, Moody's affirmed LIPA bonding ratings for an upcoming $250-million debt offering.

Assemb. Robert Sweeney (D-Lindenhurst), who along with Sen. Kenneth LaValle (R-Port Jefferson) sponsored the oversight bill, said Moody's outlook is "a little bizarre."

"To the extent that any ratings agency has credibility nowadays, it's clear that Moody's concerns about LIPA would be addressed by having independent oversight," Sweeney said.

LIPA chief operating officer Michael Hervey said, "LIPA continues to work to further improve our financial condition and is in the midst of . . . meeting our debt challenges and strengthening our financial metrics." Hervey said, "We remain concerned about the uncertainty of the PSC bill as it has already started to negatively impact our credit ratings. As we have said all along, this legislation, while well intentioned, will have unintended consequences of increasing our customers' cost as opposed to lowering it and will further hinder our ability to improve our financial situation."