LIPA board unloads on PSEG, accusing it of 'half-truths' on system fixes after Isaias
LIPA and its trustees unloaded on PSEG Long Island and its top official during a special meeting of LIPA’s board on Wednesday, accusing the company of a continuing litany of "half-truths" and "misstatements" in its claims to have fixed problems in the wake of Tropical Storm Isaias.
LIPA’s top official also accused PSEG of a "lack of urgency" in taking even the most basic steps to address a series of problems a LIPA task force uncovered. He said he worried PSEG’s officials on Long Island were still beholden to corporate executives in New Jersey.
"I think he has to check with someone in New Jersey if he has to open a box of pencils," LIPA chief Tom Falcone said of his counterpart, PSEG Long Island president Dan Eichhorn. "I don’t think he has the authority to just meet our needs."
Trustee Sheldon Cohen told Eichhorn to take back an urgent message to his corporate parent.
"We mean business and the old way of doing things is over," he said. "…This is a flawed management arrangement that needs fundamental change."
That's if it continues at all. Falcone and others reviewed LIPA's several options for managing the region's power grid in the future if PSEG doesn't meet LIPA's demands, including the option of fully municipalizing the utility.
Eichhorn told LIPA and its trustees that he and his company "understand the frustration" and that the "experience that was created [during and after Isaias] was not acceptable. We have taken full responsibility for that."
"We’ve learned a lot from this storm, and we know we can improve and move forward," Eichhorn said. "…We want that opportunity to bring your trust back and that of the customers."
He said PSEG had enacted some 30 projects to begin that process, completing several LIPA recommendations including upgrading telecom systems that failed during the storm. He noted that while the outage computer system at the root of the failures still reverted back to a former version of the failed software, upgrading to the latest version of the system was under way and would take another three to five months.
Meanwhile, Eichhorn said, management has been restructured and the "buck stops with me," not higher level managers in New Jersey. Eichhorn said he’d given up his dual role as chief customer officer for the New Jersey utility PSE&G, and had already hired some top-level computer people who report to him, among other management restructurings.
Falcone took exception to his claims, saying LIPA had already rejected proposed candidates and certain plans twice.
"We’re looking for real qualified, full-fledged people dedicated to our operations," he said, noting that if the "real senior level people are over in Newark I’m not sure we’d get the kind of attention we need."
More fundamentally, Falcone said, "I think we’re talking past each other to some degree," in coming to terms with needed fixes. Falcone led a presentation on LIPA’s future options, including one that terminates PSEG Long Island's contract and makes LIPA a fully public utility, a plan that could save money and be enacted by 2022. LIPA could also take on considerably more management itself with a different PSEG contract, replace PSEG with another service provider, or privatize, but Falcone downplayed the last option as too costly. LIPA will present the best options to LIPA's board by March 31, he said.
LIPA vice chairman Mark Fischl, who opened the meeting by calling PSEG’s performance "unacceptable" while raising "serious questions" about continuing the PSEG relationship, on several occasions cut short Eichhorn’s defenses.
"We take this feedback serious," Eichhorn said at one point. "We’re going to act on it. There is no intention to misrepresent. I think where we get into a tough situation is absolutes. If the bottom line is, is every i dotted and t is crossed—"
"We’re not talking about i’s and t’s," said a clearly exasperated Fischl. "We’re talking about truths, we’re talking about misleading statements."
Trustee Laureen Harris echoed his statement, adding, "By putting lipstick on this over and over again, there are no assurances that we can act to correct them."
Trustee Drew Biondo said he was taken aback by the fact that LIPA's Falcone had to do "real time fact checking" of Eichhorn’s statements during the meeting, saying he had a "fundamental trust issue" on whether the computer system would ever be repaired. "I’m just not sure what’s accurate and truthful anymore."
Trustee Matthew Cordaro said he believed it was essential that all top PSEG officials have permanent homes on Long Island, something he said he found wasn’t the case in the past. He has strongly supported the notion of a fully public LIPA "because it works and it works well and results in better service and cheaper rates for customers."
Trustee Elkan Abramowitz pointed to a letter PSEG sent to the state Department of Public Service in September indicating the computer system was repaired and properly stress tested.
"I’m troubled when you are asking us to trust you when you [at PSEG] write something I think is not accurate," he said.
Eichhorn pointed to the remainder of the letter clarifying the matter.
"But you said it was repaired," Abramowitz, a top-ranked defense lawyer whose firm has represented Gov. Andrew M. Cuomo, said. "We don’t trust the words that you’re using … We need to know why you were not more candid in that letter and didn’t choose your words more carefully."
Eichhorn said that stress testing did not crash the system but only forced it to operate more slowly — too slowly to be functional in a storm like Isaias.
"I probably should have put it in a little bit more straightforward English," Eichhorn said. "It was accurate, but it just was a letter that I think could have been worded a little bit more straightforward."
Falcone pointed out that, "What Dan is saying is if we have a small storm it’s fine" but with a bigger storm "the thing crashes."
Fischl concluded, "We frankly have no trust in what you are saying to us right now."
Separately Wednesday, LIPA’s board approved its $3.7 billion 2021 budget, which will hold bills flat or slightly down next year, and approved rule changes allowing for four new time-of-use rates that offer customers discounts for shifting electrical use to off-peak periods.
Average residential bills next year could drop to $163.84 a month, LIPA predicted, compared to $167.62 this year.
Trustees also approved a plan to issue up to $560 million in new borrowings, including to cover interim costs of around $300 million for Tropical Storm Isaias (before anticipated federal reimbursement), and refinancing at lower rates.