Hearings weigh in on LIPA audits

As the state Public Service Department prepares to conduct public hearings on Long Island this week to prepare for an audit of LIPA, the utility is wrapping up audits of its own that examine the lag time in paying customer refunds and the need for controls in a customer rebate program.

The public hearings will take place Wednesday and Thursday in Nassau and Suffolk respectively, giving ratepayers and others a chance to weigh in on the new Public Service audits, which were mandated by a newly passed state law. It's the first time since the Long Island Power Authority took over the system in 1998 that it is subject to any Public Service oversight.

Last week at a committee meeting of LIPA trustees, officials discussed the audit, and detailed four separate LIPA-initiated audits that are already under way, including one aimed at discovering why it takes contractor National Grid several months to refund customer payments.

"It seems to take too long to get refunds to customers and we've been concerned about it for some time," LIPA's chief operating officer Michael Hervey said Monday. He said he'd like to see lag times of up to four months cut to a month.

Trustees also were briefed on an audit of Efficiency Long Island, the 10-year, $924-million program that helps fund ratepayer measures to reduce energy consumption. The program is funded almost exclusively by customer charges on bills.

The audit by an outside firm examined the 2010 operation of the program, including applications received, rebates paid, whether documentation was present to justify payouts, and whether anyone checked to make sure payout calculations were correct before funds were released to administrator National Grid.

"One of the recommendations that popped up a few times was to have greater input from the [LIPA] internal audit department," LIPA controller Kenneth Kane said during the meeting. "The audit recommendation was that they [LIPA's audit staff] do audits annually of the program."

Kane told trustees the "underlying theme is a governance issue," specifically LIPA's oversight and National Grid's performance. "There were issues on both sides," he said. "We can tighten up our contract language or put place in policies and procedures to tighten those things up."

National Grid spokeswoman Wendy Ladd said, "National Grid has consistently met the targets for LIPA's energy efficiency programs. We continue to work with LIPA to improve the delivery of their award winning energy efficiency portfolio."

Matthew Cordaro, co-chairman of the Suffolk Legislature's LIPA Oversight Committee, has raised questions about a $28 million surplus in the efficiency fund for 2011, saying LIPA should refund collections that aren't paid out in a given year. Hervey said program delays were the reason, and LIPA expects to catch up by enticing more small businesses to use the program by year's end.