Cuomo calls for LIPA audit

ALBANY -- Gov. Andrew M. Cuomo Wednesday launched an audit of the Long Island Power Authority, citing a "series of irregularities" involving "questionable charges and overbilling" of more than $230 million over the past decade.

Cuomo directed state Inspector General Ellen Biben to open an inquiry focused on LIPA's billing practices, including its electricity delivery charges. Along with overbilling, Cuomo said he was concerned about $34 million LIPA spent in advance of Hurricane Earl, and that LIPA might be going around the state Public Service Commission to achieve recent rate increases.

"There have been a series of irregularities dealing with LIPA," Cuomo said at a Capitol news conference. "No one is alleging, here, wrongdoing. But there are questions that deserve answers."

In choosing the inspector general, Cuomo bypassed the PSC and Comptroller Thomas P. DiNapoli, who issued a harsh critique of LIPA charges in December and recently opened a probe regarding the preparations for Hurricane Earl, which largely missed Long Island. A Cuomo aide noted that the governor can direct the inspector general's office, but not the comptroller or the PSC.

"They pay some of the highest rates in the country," Cuomo said of Long Islanders. "They are reading in the newspaper about the irregularities . . . and it compounds the matter. It exacerbates the matter."

Michael Hervey, LIPA's chief operating officer, said in a statement: "We welcome the opportunity to work with the inspector general's office and will cooperate fully with the audit and are confident that this audit will be a step along the path of restoring confidence in our rates and charges."

Since September, Newsday has reported that:

LIPA spent more than $33 million responding to Earl; most of the spending was tied to costs to bring in 1,600 outside crews in advance of the storm.

A LIPA board member expressed concern about whether a recent increase in LIPA's delivery charge was manipulated to keep it below 2.5 percent to avoid a mandated PSC review.

A faulty formula for calculating "lost" power on the local grid led LIPA to overcharge customers by $231 million over the past several years. LIPA is returning about half the funds through small rate cuts.

LIPA overcharged customers by $136 million for fuel in 2010; a 4.6 percent rate cut announced in January was meant to compensate for most of it.

Assemb. Robert Sweeney (R-Lindenhurst) said that even with the inspector general's review, "clearly there's going to be a need for comprehensive ongoing oversight of LIPA down the road." He'll continue to push a bill that calls for a review of LIPA rate hikes over 2.5 percent.

Sweeney's office has met with Cuomo's staff in the past month to discuss his legislation, and LIPA as recently as this week had been preparing to submit to a third-party audit of some of its charges by an outside firm supervised by the PSC.

Cuomo acknowledged that Biben has an ongoing probe regarding Richard Kessel, the current head of the New York Power Authority and former LIPA chief. That investigation focuses on grants and charitable contributions directed by Kessel and isn't linked to the new LIPA probe.

However, Cuomo said, "Some of these actions at LIPA that the inspector general will be looking at occurred as far back as Mr. Kessel's tenure at LIPA."