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Cuomo outlines plan to restructure LIPA

Gov. Andrew M. Cuomo, right, and Senate Republican

Gov. Andrew M. Cuomo, right, and Senate Republican leader Dean Skelos (R-Rockville Centre) talk after a news conference in the Red Room at the Capitol in Albany to announce a proposal to end operating control of the Long Island Power Authority. (May 13, 2013) Credit: AP

ALBANY -- Gov. Andrew M. Cuomo sent state legislators a draft proposal Monday for restructuring the Long Island Power Authority, as he tried to gather support for his plan to give a New Jersey utility nearly complete control of the Island's electric grid.

The plan would switch day-to-day control and planning to a private operator instead of LIPA, which would be reduced to a 20-employee financial holding company. It would also place PSEG under control of a state regulatory board, refinance LIPA's debt and freeze electric rates for three years.

Cuomo Monday held his second news conference in two weeks to build momentum for the idea. He was flanked by lawmakers from both parties, who cautiously praised the plan, details of which have been out for almost two weeks.

Senate co-leader Dean Skelos (R-Rockville Centre) said the move to shrink LIPA and give control to New Jersey-based PSEG was a move in "the right direction," but said he wanted to "closely review" the plan before making a decision to support it. Assembly Speaker Sheldon Silver (D-Manhattan) echoed Skelos, as did rank-and-file legislators.

"It's a strong framework for reform, but we have a ways to go," said Assemb. Robert Sweeney, who stressed that the administration should provide "transparency and openness" for Long Island ratepayers.

Not all legislators had received the draft legislation before the news conference. "We need to see what the actual details are," said Assemb. Edward Ra (R-Franklin Square).

Babylon Town Supervisor Richard Schaffer supported the plan. "LIPA failed the residents of the Town of Babylon and Long Island during superstorm Sandy and it is time to instill real accountability to ensure we never see the same mistakes again," he said.

Cuomo has consistently said that LIPA was launched as a financial holding company -- during the administration of his father, then-Gov. Mario Cuomo -- but steadily expanded its mission over the years.

"The LIPA you see today is not the LIPA envisioned when it started," Cuomo said.

Under this scenario, PSEG would be responsible not only for the operation and maintenance of the electric system, but also would control capital and operating budgets, storm preparedness and response, call centers, computer systems and customer service.

"A professional manager should be running the company, soup to nuts," Cuomo said.

The governor originally proposed completely eliminating LIPA and privatizing the Island grid. But that met with skepticism about the impact on power rates and the possible loss of tax-exempt status for borrowing and receiving federal aid.

Cuomo wants lawmakers to approve the overhaul before the scheduled June 20 adjournment of the legislative session.

A top Cuomo official acknowledged Monday there's no guarantee it can be done before the upcoming hurricane season.

"We're working quickly through a transition. I don't know whether we'll be able to," said Larry Schwartz, secretary to Cuomo. "The most important thing is that we do the transition right for Long Islanders."

PSEG was already set to take over management from National Grid by Jan. 1, when the latter's contract expires. Schwartz said if National Grid is still in place, the administration would work closely with it to monitor response -- as it did with the March snow storms.

Schwartz said they are renegotiating PSEG's $3.3 billion contract. But he said he was "confident" that the expansion of PSEG's duties won't trigger state laws that would force the contract to be rebid. PSEG said it was working on the contract with the administration and supported the proposal to allow it "to take on an expanded role."

Many lawmakers said the fine details of Cuomo's legislation would be crucial.

Assemb. Andrew Garbarino (R-Sayville) said the "rate freeze is nice," but asked "what happens after three years?" He said he wonders whether LIPA's debt -- which accounts for about 10 percent of customers' bills -- could spike future rates.

Assemb. Steve Englebright (D-Setauket) questioned reducing the LIPA trustees from 15 members to five. "Are they going to be from Long Island?" he asked. "Who appoints them? We need to know what qualifications are to be expected."

Englebright is also concerned about a decision on overhauling the Port Jefferson plant in his district, and whether a "lame duck" LIPA or a newly restructured one will be making big decisions about future power sources.

Further, Englebright noted the PSC had a poor record overseeing the Long Island Lighting Co., LIPA's predecessor.

"They signed off on everything that was put forward to them by LILCO," he said. "They gave us high rates, a Shoreham [nuclear] plant before there was evacuation capability and ultimately they gave us the debt."

With Mark Harrington




Gov. Andrew M. Cuomo has unveiled draft legislation to restructure LIPA. The plan would:

Allow the state to privatize operations of the Long Island electric grid under New Jersey-based PSEG.

Refinance LIPA's current debt.

Freeze customer rates for three years.

Place PSEG under oversight of the state Public Service Commission.

Shrink LIPA from about 100 current employees to 20-30, and allow it to exist only as a financial holding company.

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