Clock is ticking on proposal to transition LIPA to a fully public utility
LIPA power lines along Motor Lane in Bethpage on March 8, 2019. Credit: Newsday/Steve Pfost
The clock is running down on a plan to transition LIPA to a fully public utility, as State Assembly sponsors struggle to bring the public measure to a vote while the Senate has yet to introduce a companion bill.
If the state legislative measure were to fail — as seems increasingly likely — and LIPA is not able to put the contract out to bid to find a new operator in the coming weeks, it would be a victory for New Jersey-based PSEG, which has spent hundreds of thousands of dollars lobbying against a fully public utility. One option that could be on the table is an extension of PSEG's existing contract, which expires at the end of next year.
Criticism of PSEG as grid operator by LIPA management and the state Department of Public Service followed its failures during Tropical Storm Isaias in 2020. After conducting a probe, DPS recommended that LIPA search for a new grid manager or operate the utility itself, according to a lengthy state report critical of PSEG.
Proponents of the bill to make LIPA fully public, which they say would save ratepayers $80 million a year and give Long Island lawmakers and a union seats on its board for the first time, have just over two months to get the measure passed by the legislature. LIPA, meanwhile, is working on a backup plan to put the contract out to bid should the measure fail.
That effort could be complicated by the resignation of LIPA chief executive officer Tom Falcone, which was announced this week. Falcone, a 10-year LIPA veteran, had been among the chief critics of PSEG's performance and has led a buildup of both LIPA's financial position and its bench of experienced executives.
"The resignation of Tom Falcone coupled with the lack of a Senate sponsor for transitioning LIPA to public power significantly clouds its future," said the bill's sponsor, Assemb. Fred Thiele (D-Sag Harbor).
It’s unclear whether Gov. Kathy Hochul’s office supports the measure for a fully public LIPA. Asked last week if she supports the measure, Hochul, on Long Island to celebrate completion of the LIPA-originated South Fork Wind Farm, said, “That requires legislation. If something comes to my desk I’ll certainly look at it.”
Noting the PSEG contract expires at the end of 2025, LIPA in a statement said, “We are actively evaluating options for next steps.” Last fall, LIPA said the process for putting the contract out to bid “will need to begin early next year” to ensure negotiations and approvals by the board and state comptroller.
“The timeline is tight,” said Thiele, who noted his plan to pass the measure in the full Assembly could be the momentum that eventually leads to full legislative passage.
Thiele said the plan is to move it in the Assembly “as soon as possible.”
Sen. Kevin Thomas (D-Levittown), who co-chaired a state legislative commission on the future of LIPA, is “waiting for majority counsel to review the legislation. But right now they are going heavy on the budget obviously,” said spokesman Tyler Muzio.
Jonathan Heppner, a spokesman for the Senate Majority Leader Andrea Stewart Cousins (D-Yonkers), said, “We have not done program bills yet this session. Once all introduced program bills are done being reviewed, they will move forward in the process.”
One supporter of a fully public LIPA urged Thomas to advance the bill anyway.
“I’m not sure what Sen. Thomas is thinking,” said David Denenberg, co-director of Long Island Clean Air, Water, Soil. “Without a companion Senate bill, the momentum really does slow down. It’s unfortunate because timing is everything.”
Delaying works in PSEG’s favor and the New Jersey contractor has allies in its effort to keep the current public-private system in place while raising questions about municipalization, including the Building & Construction Trades Council of Nassau and Suffolk Counties.
“I see this unraveling for a couple of reasons,” said the trade council's president, Matthew Aracich. “It’s an election year. And there’s enough support to stop it from our sector of labor for a reason. There’s too many unanswered questions.”
The IBEW local 1049, which represents around 1,500 PSEG workers, in a statement said, “We believe the existing structure provides the best protection for our members, but remain receptive to engagement [for a fully public LIPA] as discussions move forward.”
Lining up in support of the bill is new Suffolk County Executive Ed Romaine, a Republican, who said he backs “a public effort to take back LIPA so accountability and trust are restored.”
“Long Island is in dire need of a responsible public energy utility that will provide the services and response expected by the ratepayers,” he said in a statement. “Above all, the people need to have their voices be heard.”
To date, most of the support for the effort has come from the Long Island Progressive Coalition activist group, whose executive director, Lisa Tyson, spoke in favor of it at a LIPA board meeting in January. Some 100 affiliated groups also have signed on in support, she said.
“Under PSEG management of LIPA, the ratepayers have had no say in how their utility is run,” Tyson said. “The LIPA Public Power Act will change that.”
Tyson is up against another outspoken Long Island progressive who has been leading the charge against public power. Christopher Hahn, who hosts a weekly podcast that labels him the “Aggressive Progressive,” has been the most publicly critical voice of a fully public LIPA in lobbying state officials and public comments that have endorsed PSEG.
Hahn, a former LIPA trustee, is vice president of government affairs for PSEG Long Island, which has been lobbying to keep in place the public-private partnership in which PSEG operates the system for around $80 million a year. He didn’t immediately respond to a request for comment.
Records also show Rodney Dickens, who was rejected by LIPA’s board as a chief operating officer for PSEG Long Island but remains an executive adviser to the company overseeing Long Island, has registered to lobby on PSEG’s behalf in New York State.
The LIPA board instituted measures to require that PSEG disclose lobbying and seek approval for the measures it lobbies on, but the company has not complied, Newsday has reported. PSEG has said maintaining the current public-private partnership is in the best interests of ratepayers.
But Thiele said renewing PSEG's contract is "not an viable option, given their record of poor performance and public misrepresentations. Long Islanders deserve better."
Among opponents of the bill is the Long Island Association, a business group that wants LIPA to conduct a bidding process to determine the value of its assets as a prelude to a possible sale of the utility. That position is a 180-degree turn from the LIA’s position in 2013, when the LIA led opposition to a plan by former Gov. Andrew Cuomo to sell the utility. Among the reasons: LIPA would lose access to potentially billions of dollars of federal emergency funds and to the tax-exempt bond market.
The LIA this year released a shortlist of lobbying priorities, topped by the platform that it would “oppose the municipalization of LIPA.”
LIA leadership has previously appeared with former KeySpan and National Grid chief executive Robert Catell, a LIA board member, and financial firm Lazard in advocating for Lazard’s plan for the LIPA system be sold to the highest bidder.
LIPA has said such a procurement would prevent it seeking new borrowings from the bond market until the review is complete, because a potential sale of LIPA would entail altering bond covenants. A LIPA analysis asserts that selling off the system would lead to sharply escalating rates after five years of reductions.
Thiele said passing the municipalization is the best way forward for Long Island but suggested it's going to take political will to get it done. "New York State and Long Island's elected leaders need to stand up and be counted now about the future of LIPA," he said. "Based on the facts and objective criteria, I believe the best future is municipalization."
Mark Harrington, a Newsday reporter since 1999, covers energy, wineries, Indian affairs and fisheries.
