LIPA bill sponsors, Cuomo staff to meet

Legislative sponsors of a bill seeking regulatory oversight of Long Island Power Authority rate increases will meet with Gov. Andrew M. Cuomo's staff this week to explore alternatives as the clock winds down for action on the proposed law.

The challenge: finding a way to circumvent concerns that the bill as written could trigger a downgrade of LIPA's bond rating, thus increasing the authority's borrowing costs.

One proposal that will be hashed out this week would allow for outside scrutiny of LIPA rate hikes of 2.5 percent or above by an administrative law judge with support from Public Service Commission staff. Rather than approve or reject the hike, the judge would present a report and recommendation, but leave the ultimate decision to LIPA trustees, legislators said.

No specifics yet

A Cuomo spokesman declined to discuss specific alternatives.

"Conversations are still ongoing to fashion an agreement that protects ratepayers and reforms the system," spokesman Joshua Vlasto, said.

State Sen. Kenneth LaValle (R-Port Jefferson), who sponsored the bill with Assemb. Robert Sweeney (D-Lindenhurst) said he could support a measure that involves a PSC-type rate review, so long as trustees give the proper weight to the law judge's recommendation.

"There would be enormous political pressure on trustees who dismiss a finding that would suggest a rate increase is not warranted," LaValle said.

Sweeney said he has indicated to Cuomo's staff that he's willing to discuss alternatives to the legislation, so long as they provide "meaningful" oversight on rate hikes.

But Sweeney said giving trustees the final approval, even after an outside review, "is something I don't think is credible. LIPA has always found ways to avoid the regulatory process."

Some risk involved

Yet, putting the review entirely in the court of the PSC could be a risk, LaValle said, if bond-rating firms downgrade LIPA.

"We have to talk this through because no one, including myself at this juncture, wants to go to the crap table and roll the dice to see: Are we or are we not going to downgrade their bond rating?" he said.

Backers of the bill as originally passed say more scrutiny of LIPA finances should strengthen Wall Street's confidence in LIPA, not damage it. But bond-rating firms find fiscal comfort in LIPA's ability to raise rates as needed.

The bill that passed both houses of the legislature this summer would subject any LIPA rate hike of 2.5 percent or above in a 12-month period to a full PSC review -- even those rooted in higher fuel costs.

Neither the current bill nor any proposed amendment would provide a venue for ratepayers who have complaints about LIPA service.

Customers of other regulated utilities in the state can call or write the PSC directly when they have complaints about their utility.

LIPA is scheduled to release its 2012 budget, including any proposed rate actions, this week. LIPA opposed the pending legislation, though it has said it is open to reviews of its finances.