LIPA orders review of $223M in storm costs

The Long Island Power Authority has ordered an unprecedented review of all $223 million in 2010 storm costs processed by National Grid, after a LIPA review found what it termed a small amount of improper and undocumented charges, LIPA officials said.

Last week, LIPA officials presented National Grid, which manages the power authority's electric grid under a $2.37-billion multiyear contract, with a sampling of the questioned charges. They included some $5,000 worth of receipts for alcoholic beverages, undocumented hours, missing equipment and, in one case, a meal charged from an off-Long Island location. As previously reported, LIPA is also questioning around $160,000 in limousine company charges.

National Grid "wants to ensure that customers will not pay for any unjustified [storm] expenses," said John Bruckner, president of National Grid's LIPA business. "Our additional review will ensure that all costs passed on to LIPA to provide effective storm response are accurate and accounted for."

The new review follows testimony at a State Senate hearing last week that LIPA had challenged $5.5 million in charges processed by National Grid from the $34-million response to Hurricane Earl last summer. The storm largely missed Long Island yet LIPA brought in 1,600 outside workers to the region.

LIPA paid for the workers' hotels and meals. LIPA said it audits every receipt, but noted that National Grid is supposed to do the same before LIPA ever sees them.

"We need to have them go back and make sure they verify that all these [charges] were legitimate," LIPA chief Michael Hervey said. "We have a large number of meals and hours that are not fully documented."

Equipment not returned

LIPA is also requesting information about unreturned equipment. Outside crews reporting to Long Island for work get a box of equipment to conduct repairs on the LIPA system. Some crews that checked out these materials did not check them back in on departure, Hervey said.

Hervey said a review of bills has turned up fewer than a dozen instances of crews charging alcohol to LIPA, which prohibits the expense. Only outside crews are reported to have made the charges.

Hervey refuted a report at the Senate hearing that the expenses included programmed bonuses for workers and managers. Included in normal benefits for managers and others at National Grid are those related to incentive compensation if the company meets all its service targets for the year. A percentage of that pay, like that for other benefits, would come from salary and overtime earned during the storm, Hervey said. A limited number of workers during a March 2010 nor'easter, he said, received "above and beyond" pay for going "all out" on the job. The amounts, approved by LIPA, averaged $50 per employee, and totaled a few thousand dollars, Hervey said. The incentives weren't paid for Hurricane Earl or other 2010 storms.

LIPA also approved special baseball caps for National Grid employees for their storm efforts -- which Hervey said cost $4 each, and amounted to thousands of dollars.

"It's completely appropriate, and it happens rarely," Hervey said.

The review will be a huge undertaking. Hervey said. LIPA has "boxes and boxes" of receipts and charges that it is asking National Grid to review.

One observer applauded the review.

"I think it's a good idea, although it underscores their failure to do a proper storm auditing job in the past," said Matthew Cordaro, an energy expert and co-chairman of the Suffolk Legislature's LIPA oversight committee. He brought the expenses to a State Senate energy committee's attention this month.

Hervey said LIPA won't pay extra for the review, noting that it is National Grid's responsibility under the contract.

"It's a pretty huge job. It will take some time -- months. We don't even have all the bills here yet," Hervey said.

Unusual circumstances

Hervey said the billing questions were largely the result of the volume of charges and the larger-than-normal number of storms last year. LIPA spent about $50 million responding to storms in 2009, and $46 million in 2008 -- figures that more than quadrupled in 2010.

"Storm activity was certainly there for the year, that justified doing the work," he said.

Hervey said he doesn't expect the review to result in tens of millions of dollars in credits back to LIPA. Primarily, he said, "At least we'll know it's correct -- that's the big point here. It's [National Grid's] responsibility. Hopefully, we'll have better billing going forward."