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Critics of Cuomo LIPA plan file petition seeking federal oversight of PSEG

4. LIPA CEDES CONTROL TO PSEG - After

4. LIPA CEDES CONTROL TO PSEG - After questions were raised about LIPA's management, finances and response time after superstorm Sandy, Gov. Andrew M. Cuomo proposed a plan that gave PSEG, a New Jersey utility company, nearly complete control of the Long Island power grid, replacing the LIPA brand with a new entity, PSEG-LI. On Oct. 3, LIPA trustees approved Cuomo's effort to reform the utility. Read the full story Credit: Steve Pfost

Critics of Gov. Andrew M. Cuomo's plan to overhaul LIPA filed a late objection to one critical approval granted by federal regulators that frees the new operator, PSEG-Long Island, from federal oversight.

Two business groups, Action Long Island and Long Island Metro Business Action, filed a petition for rehearing with the Federal Energy Regulatory Commission last week. Their lawyer, Irving Like, a frequent critic of the Long Island Power Authority overhaul act, said the group wants FERC to have full jurisdiction over PSEG-Long Island.

FERC on Oct. 2 approved a request by the utilities to declare that the new PSEG-Long Island and a new LIPA operating entity called Servco are not public utilities. That status means that PSEG-Long Island, the entity that is taking near control of the LIPA system in January, and Servco won't be subject to the regulatory jurisdiction of FERC, which could have altered the relationship between LIPA and PSEG and potentially added regulatory oversight and expense.

The petitioners argue that there's no question the two operating entities assume nearly full control of LIPA and as such are public utilities, while LIPA is reduced to a holding company. "If they look, talk, and act like public utilities, as they do, they are public utilities," the petition said.

They further charge that FERC based its final ruling on incomplete information because the final contract between LIPA and PSEG wasn't available until after FERC granted its approval.

Karen Johnson, a PSEG spokeswoman, said, "We believe that FERC's order and findings were appropriate based on the circumstances of the transaction. We are evaluating whether we will file a response with FERC."

LIPA didn't respond to a request seeking comment.

One LIPA trustee said there was merit to the petition. "The notion that LIPA has ultimate control is definitely an overstatement," said LIPA trustee Matthew Cordaro, noting the operating contract frequently amounts to "management by consensus," with disputes resolved by arbitrators. "That does not sound like LIPA really has ultimate control."

Ideally, said Like, the petitioners want the FERC to invalidate the recently approved operating services agreement between LIPA and PSEG -- a 12-year deal valued at $5.1 billion. Failing that, he said, "We want FERC to have jurisdiction."

Craig Cano, a FERC spokesman, said the petitioners filed their request for re-hearing within the allotted 30 days.

"The commission considers all arguments raised in rehearing petitions and issues a subsequent order that addresses the merits of those arguments," he said. After the review, FERC can affirm the original order, make modifications or reverse it. He declined to speculate on which would happen in this case.

And while FERC can "take as long as it needs to issue the rehearing order," it typically issues an order granting rehearing for further consideration within 30 days, Cano said.

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