LIPA chairman's bombshell: Let's privatize

Amid calls for greater scrutiny of the Long Island Power Authority, LIPA chairman Howard Steinberg Thursday dropped a bombshell: Privatize the public utility.

"If I could wave a wand today, I would say, 'Restore LIPA to private hands and PSC [Public Service Commission] regulation,' " Steinberg said in an interview, elaborating on his remarks during a trustees meeting.

LIPA, a state authority, is undergoing a strategic review of its long-term structure, one that examines selling the assets to a private company or taking on National Grid's thousands of LIPA workers and other assets and running the system itself. (London-based National Grid runs LIPA's electricity transmission and distribution systems under a $2.3-billion contract that expires in 2013.) LIPA came into being in 1998 as a result of public outrage over high utility rates under the Long Island Lighting Co., a private utility.

A third option, continuing as is, won't work, Steinberg said. "My personal opinion is that LIPA has matured and that this structure is no longer the best structure for the system."

Some board members disagreed with Steinberg, while one observer went so far as to call for his resignation.

Comments 'shocking'

Suffolk Legis. Wayne Horsley (D-Babylon), chairman of an energy committee for the legislature, termed Steinberg's comments as "shocking."

"Here is a chairman of the trustees abdicating any responsibility for LIPA's shortcomings," he said, calling the comments desperate. "Maybe it's time for him to leave the board."

Steinberg's comments came one day after Gov. Andrew M. Cuomo ordered a broad audit of LIPA by the state inspector general into questions of overcollections, high rates and excess storm charges. Steinberg said LIPA welcomes the audit and will cooperate fully.

But he also expressed frustration that LIPA keeps taking the heat for mistakes that he placed largely at the feet of National Grid. Under the current structure, a staff of 90 LIPA state employees oversees a sprawling, $4-billion operation, including National Grid.

"Our interests are not always aligned," he said. "Our systems are run by National Grid. Our ability to control that is limited."

That lack of alignment leads to problems such as the recently reported $231-million overcharge tied to power leakage in the system -- an issue that Cuomo referenced Tuesday. Steinberg said the problem was "embedded within Grid's system for 20 years, and we just found out about it a few months ago," after a review by LIPA controller Kenneth Kane.

"And what happens when we find out about it? LIPA takes all the heat in the media, and Grid runs and hides," he said. "We have never had, as far as I know, a public apology for anything that's been their [National Grid's] fault. We don't even get a private apology."

Nation Grid response

Asked for a response, Wendy Ladd, a National Grid spokeswoman, said, "We continue to work cooperatively with LIPA to address any and all of their concerns."

Steinberg, who said the pending chief executive appointment for LIPA will be postponed until after the state audit, said privatization could be more suited to the large, debt-laden entity LIPA has become. He said he would welcome a Public Service Commission review of LIPA, but not under its current structure.

"Frankly, I'm not worried or afraid of PSC regulation," he said. "People want us to be regulated by the PSC. You know, if we were a private entity, we would be regulated by the PSC, and that'd be fine."

Fellow trustees weren't so quick to turn over the keys to LIPA, or accept the blame for all that ails the authority. Trustee Neal Lewis said he was "not a fan of privatizing," though he said he'd "keep an open mind" as LIPA's strategic review moves forward.

During the meeting, trustee Michael Fragin passionately defended the board's oversight, saying it has gotten short shrift from lawmakers and the media. The perception that "no one is minding the store" is "very troubling," he said, and "just not true."