LIPA audit will be thorough, state says

A new era in state oversight of LIPA kicked off with little fanfare at the Nassau Legislative building Wednesday, as regulators outlined the scope of a forthcoming audit of the utility.

Officials from the Department of Public Service told a handful of ratepayers at the first public hearing of the audit's scope and limitations. It follows passage of a law that calls for management audits of LIPA at least every five years, and for state Division of Consumer Protection to mediate ratepayer complaints about LIPA. The hearings were mandated to give consumers input on the audit.

Six or seven DPS staffers will work to direct an outside firm yet to be chosen to conduct the audit, which officials stressed will not examine specific rate hikes.

Wayne Brindley, deputy director of the office of accounting, said the management audit will nevertheless be comprehensive. "We look at the entire company's operations," he said, from the board of trustees to the workers in the field.

Brindley, who lives in Elwood and experienced an outage for several days during Tropical Storm Irene, said he intends to be on site at LIPA for much of the yearlong audit. He said he intends to "put to bed" lingering questions such as why the Shoreham nuclear plant continues to weigh on finances and "how do you run such a complex organization with only 100 employees."

LIPA staff oversees dozens of contractors, including National Grid, which operates the system with 2,000 employees.

But LIPA's decision to switch from National Grid to PSEG will complicate the audit, said Brindley, as will its recent change of chief financial officers.

Brindley said he intends for the recommendations that come from the audit to lead to meaningful changes at LIPA. "I hope to be able to reduce rates" by identifying inefficiencies and the need for best practice, he said, "but it's basically a byproduct of our efforts."

He stressed that the audit was "not a rate case," which examines specific rate increases.

Only one ratepayer showed up to offer input to the department for its planned management audit.

The public hearings, including another one Thursday at Suffolk Community College in Brentwood, will help shape a request for proposals by the state for the audit, which the DPS expects to be begun in May and to be wrapped up by June 2013.

Brindley pointed to several other reviews and audits of LIPA, including one recently commissioned by LIPA that found the authority was an efficient operation "doing the best they can." Yet he noted LIPA has traditionally ranked among the worst utilities in the nation for customer satisfaction. The audit will help to shed light on that "paradox."

LIPA ratepayer Tom Gallagher of Wantagh raised questions about LIPA's bills with "hidden costs" in taxes, costs for solar panels that benefit a few, and storm costs to bring in outside crews.

Lisa Harris, director of the state Division of Consumer Protection, which now handles consumer complaints about LIPA, said the agency has a "very small staff" of two people to handle complaints, which it will "mediate" on a "voluntary" basis. To date the division has received only a handful of complaints from LIPA ratepayers, Harris said.