LI officials cool to Moreland Commission idea to privatize LIPA

The state-recommended concept of reprivatizing the Long Island electric grid received a cool reception Monday from local political leaders and experts, who worried ratepayers could again get stuck with the bill.

Gov. Andrew M. Cuomo's Moreland Commission yesterday identified privatizing the Long Island Power Authority as the best alternative to problems laid bare after superstorm Sandy.

The panel said privatization would return the system to the oversight of the Public Service Commission, and allow a new owner to reduce costs by eliminating outside contractors and fostering "more efficient operations."

But even longtime LIPA critics questioned the concept, noting that LIPA was a much-despised private utility in its previous form as the Long Island Lighting Co., which was also subject to PSC oversight.

"Privatization is a place we were at before with LILCO and were desperate to get away from," said Assemb. Robert Sweeney (D-Lindenhurst). "I would be leery . . . unless someone can tell me how ratepayers are going to be better with it."

State Sen. Kenneth LaValle (R-Port Jefferson) noted that "in days gone by, people couldn't get away from investor-owned utilities fast enough." He said considerable work will need to be done to show the concept of privatization works. "The devil's in the details."

Sweeney and LaValle both noted that LIPA was originally intended to be a fully public utility, not the public-private partnership with KeySpan/National Grid that it eventually morphed into. Both said full municipalization should be considered. "We don't need to reinvent the wheel," Sweeney said.

But the Moreland Commission balked at the idea of fully municipalizing LIPA, saying it would add 2,000 employees to an already overburdened state payroll system. And Cuomo said that when he heard the idea, he considered throwing something at the TelePromp-Ter, noting, "It doesn't work now and I don't think any expansion of them is an option."

Nassau County Executive Edward Mangano agreed with the state's recommendation. "I believe this will be the best option toward efficiency and reliability," he said in a statement.

Desmond Ryan, executive director of the Association for a Better Long Island, a developers group, said the state should first address the problem of LIPA's $6.9 billion debt, its high rates and its oversized property taxes. "Everything else falls into place after those three issues are addressed," he said.

Rich Reichler, an attorney at the firm Meltzer Lippe in Roslyn and a former tax lawyer for LILCO on the 1998 sale, said privatizing raises the questions of who will assume LIPA's $6.9 billion debt, and how the new utility will pass off the cost of federal income taxes, which LIPA now avoids.

"Nobody talks about the dirty details," Reichler said. "But I think there is something embedded in the concept that you can't transfer the debt to a buyer, because there's a loss involved . . . Whatever is not going to be recovered in the sale is a dead loss, and who is going to bear the loss?"