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Area utilities vie to operate LIPA's power grid

Could Con Edison, New Jersey's PSE&G or Connecticut Light & Power be next in line to manage the Long Island electric grid?

Those are among the possibilities as the Long Island Power Authority begins reviewing options once the current contract with National Grid expires in May 2013. State officials, business leaders and lawmakers have been demanding that LIPA competitively bid the contract since it was awarded to KeySpan and National Grid, respectively, over the past decade. A formal request for proposals could take place as soon as this summer.

LIPA chief Kevin Law Thursday said that a recently completed request for information, a preliminary step before formal bidding, drew responses from more than 10 companies, including Con Ed, Northeast Utilities in Connecticut, and PSE&G. National Grid didn't formally participate, but spokeswoman Elizabeth Margulies said, "We fully expect to participate in the request for proposal process."

Chris Olert of Con Ed said, "Yes, we have submitted an expression of interest."

Mitch Gross of Connecticut Light & Power confirmed the company participated in LIPA's request for information but declined further comment. "We'll see if we make the cut first," he said.

A PSE&G spokeswoman didn't return a phone call.

Much is at stake. The $2.367-billion, 7-year contract manages power transmission across the Island, and distribution to homes and businesses. It includes meter reading, installation and repairs, billing and customer service. The contract employs more than 2,300 unionized field and office workers.

Analysts say bidding on the contract could extract lower rates and better service terms for customers, though some question how much.

Besides putting the contract out to bid, LIPA also is exploring taking on management of the electric grid itself, as well as potentially selling the grid to a private company. Investment firm Lazard is helping LIPA with the analysis. "We need to review all those options," Law said. "We can't wait until 2013 to make a decision."

If, as LIPA has promised, the contract goes out for public bidding, Con Ed may have advantages.ConEd last year won a contract to handle LIPA's energy trading through the state power regulator, a contract once held by National Grid/KeySpan. LIPA and ConEd also are considering splitting the cost for a wind farm off the coast of Far Rockaway. And while the LIPA and ConEd territories share a common border, LIPA still operates in Far Rockaway, in what is otherwise a ConEd territory.

Con Ed has already expressed interest in operating on Long Island. It was among the companies vying for KeySpan in 2006 and prior years, but it was outbid by National Grid, which is based in London. Observers say it has been desperate to expand.

"From ConEd's perspective, the question is, how are they going to grow?" said a former utility executive who asked that his name not be used. "They have limited opportunities to do it. Long Island is contiguous."

Former LILCO executive Matthew Cordaro said while Con Ed might make the most sense given its proximity and similar work forces, he wasn't sure replacing National Grid would mean lower rates. He noted that National Grid also owns the Island's natural gas system, which brings economies of scale. "It's hard to compete with Grid for that reason," he said. But Shelly Sackstein, a former LIPA trustee and chairman of business group Action Long Island, said he's support bidding the contract out to another company, so long as the company performs.

"If they can do the job in a cost-efficient fashion and jobs can be protected, we would support it," he said.

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