LIPA discloses utility's bidders

LIPA on Thursday confirmed that Con Edison and New Jersey's PSE&G are competing with National Grid for the right to manage the Island's electric grid as the utility undertakes a broad review of its future structure.

It's the first time LIPA has officially identified the list of bidders for the $2.3 billion contract, which is currently held by National Grid and which LIPA is seeking to improve under a newly negotiated management agreement. National Grid's contract expires in 2013.

LIPA in recent weeks has been negotiating with all three companies on terms of a possible deal. The alternatives to the existing public-private partnership include selling the system to a private company or LIPA hiring existing National Grid utility workers and "municipalizing" the system. A decision is expected in three months.

LIPA trustee David Calone noted recent problems with the way the system is run with National Grid and said, "It's not something this board of trustees will tolerate." While Calone did not specify, Newsday has reported a series of problems with billing, overcharges and other customer service issues.

Privatization, which has been publicly backed by LIPA chairman Howard Steinberg, could introduce new costs because LIPA would lose its tax-free status, Calone said, while municipalization could involve higher labor and pension costs, though each also has advantages. Improving the current system is "the most conservative" and "flexible" option, he said, but LIPA plans to hold hearings and continue reviews to determine which is best. The transition to a new structure must begin by year's end, Calone said.

Action Long Island, a business group, this week publicly called on LIPA and Gov. Andrew M. Cuomo to delay the process so that the utility doesn't rush in the wrong decision.

Meanwhile, LIPA has been conducting numerous other reviews, even as it faces passage of legislation that would allow state regulation of rate increases and faces a state probe by the inspector general.

In addition, said Michael Hervey, LIPA's chief operating officer, the utility recently started a strategic cost-cutting review to eliminate "hundreds of millions of dollars" in costs over the next five years.

The reductions could come from efforts LIPA already has begun, such as tax-grievance filings, Hervey said. He added that LIPA also will review a rate structure that hasn't been altered since the system was owned by Long Island Lighting Co. more than a decade ago. LIPA is also reviewing new power options for the region.