LIPA negotiates $80M insurance settlement for Sandy damage

The good news: LIPA just negotiated an $80 million insurance settlement for damage related to superstorm Sandy. The downside: it has to give the money to the federal government for previously awarded grants of the same amount.

The authority announced Wednesday that it reached the settlement with its insurance company to cover damage and repairs to critical grid infrastructure during the 2012 storm. Among other things, Sandy destroyed a dozen substations (facilities that step down high-voltage power from plants for use by customers in neighborhoods and business districts), metering equipment and other infrastructure. Of those substations, 10 have since been rebuilt.

All of LIPA’s $700 million in costs related to the devastating storm, which knocked out power to nearly 1 million of its 1.1 million customers, essentially was paid for by grants from federal agencies. The Federal Emergency Management Agency paid 90 percent of those rebuilding costs, and the balance came from a Housing and Urban Development grant.

In the end, said LIPA chief of staff Tom Falcone after a trustee meeting Wednesday, ratepayers had all Sandy-related costs paid for through the federal grants. Another $730 million in those grants covered storm hardening against future events.

“The customer isn’t paying,” Falcone said. “That’s the benefit of being a public power utility.”

Elsewhere in the state, investor-owned utilities such as Con Edison and National Grid are not eligible for such federal disaster grants, and must pass on storm-damage costs to their customers and shareholders.

But even though LIPA is obligated to send the $80 million settlement back to FEMA since the agency requires that utilities file for and collect any owing insurance policies to defray its own expenses, there is a chance that LIPA may be able to use a portion of the settlement money to defray some storm-hardening costs, officials said. Negotiations are underway and will continue possibly for years.

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

Mark Harrington, a Newsday reporter since 1999, covers energy, wineries, Indian affairs and fisheries.