LIPA moves to hire its own auditor

With state auditors circling, a committee of Long Island Power Authority trustees last week approved marching orders for a new director of internal audit to review charges from National Grid and other costs amid heightened concern of overcollections and excessive storm bills.

The move came days after Gov. Andrew M. Cuomo ordered the state inspector general to audit LIPA, and as state Comptroller Thomas DiNapoli said he was still awaiting documentation from LIPA to review 2010 storm costs. LIPA said it has provided the requested documents.

At the meeting, trustees were briefed by LIPA staffers on storm billing procedures by National Grid -- costs that ballooned more than four times what they have been in previous years to $223 million last year. LIPA has been contesting charges for Hurricane Earl, which largely missed Long Island, and other storms.

The new director of internal audit -- LIPA's first on-staff auditor -- is expected to be hired this summer, and will report to the trustees' finance and audit committee and LIPA's chief executive. The position was approved last year as part of the 2011 budget, but trustees suggested the need for the post has become apparent in recent months.

"We need more resources to look after what's going on at National Grid, which produces all our records and has not done the job we would have been satisfied with, especially over the last couple of issues that we've seen arise," said trustee Larry Waldman. "I think it's virtually impossible for us to rely on their audit staff to supplement us, because they have failed us too many times before when we went for help, and I don't think the arrangement really works."

A recent segment by local National Public Radio affiliate WSHU reviewed receipts for Hurricane Earl and found storm-crew charges such as $504 for a trip to Hooters, $93-per-person meals at Burton & Doyle steakhouse in Great Neck, and $160,000 in Mercedes transports to take crews from hotels to work staging areas. There are also two charges for $698 for Signature Bagels.

Some of the charges are among the $5.5 million in billings Newsday has previously reported that LIPA is contesting. They also include $24,000 from a landscaping firm; a $75,000 "miscellaneous" charge at a Marriott Hotel that is not accounted for; and $6,908.40 from a Yaphank firm called Waste Recycling Solutions for work that wasn't performed during the storm, the LIPA-supplied documents show. Officials at Waste Recycling weren't available for comment.

"We currently are working with LIPA to review our policies and procedures, and modify them if required to ensure that all storm costs are appropriate and will continue to be, going forward," National Grid spokeswoman Wendy Ladd said. "Any expenses that are determined to be inappropriate will be absorbed by National Grid."

Peter Schlussler, a former KeySpan engineer who now sits on a LIPA oversight committee of the Suffolk Legislature, said it’s about time trustees pushed for more controls.

He contends that items ranging from theft of equipment to long-overdue but non-storm repairs are improperly charged to LIPA as storm expenses when they should be charged to National Grid, which has a $2.3 billion contract to operate the regional electrical grid.

LIPA pays the cost of storms when more than15,000 customers are knocked off power, among other factors. During Earl, LIPA called for 1,600 crews in advance of the storm, and triggering the expenses even without customers affected.

LIPA has a $15 million reserve account for National Grid to draw from when a big storm hits, which LIPA automatically replenishes when it runs out.

National Grid justifies expenses later, and must reimburse LIPA for any charges deemed incorrect, with interest.
 

“For one thing, a lot of costs are buried in the storm costs that don't belong there,” Schlussler said. “It’s never audited.”

LIPA said an operations staffer, not an auditor, reviews the bills, but the job primarily involves making certain bills are accompanied by receipts.

Newsday reported last week that LIPA has ordered National Grid to review all 2010 storm costs to clear up any charges that don’t belong there.

Michael Hervey, chief operating officer of LIPA, told trustees at the committee meeting last week that LIPA has suspended an internal check of the receipts until National Grid completes work it was supposed to do initially.

“It is very simply their job to do that,” Hervey said. “They shouldn’t be sending charges over that they know we are just going to dispute because they haven’t sent the proper documentation.”

Last week, LIPA chairman Howard Steinberg also took sharp aim at National Grid, saying the LIPA-Grid partnership may have “outlived its usefulness.”

When problems arise such as $231 million in recent overcharges, “LIPA takes all the heat in the media, and Grid runs and hides,” Steinberg said.