LIPA's move to create competition could fuel lower rates

The Long Island Power Authority last night issued a formal request for bids for the contract to operate the regional electric grid, a long-awaited move some say could lower electric rates by subjecting current contract holder, National Grid, to competing offers.

The $2.367-billion contract, awarded to London-based National Grid when it bought KeySpan in 2007, involves most elements of getting electricity to LIPA's 1.1 million customers. The contract employs thousands of local workers and expires in 2013.

LIPA expects to take at least a year to review bids, and recently hired a consultant for up to $1.5 million to help in the review. The lucrative contract has never been competitively bid, despite laws requiring it. One local official said that has kept rates high.

"It's about time that LIPA is doing this," said Assemb. Marc Alessi (D-Wading River), who began pushing for it in 2005.

Outgoing LIPA chief Kevin Law, who leaves at the end of August, said the request for bids fulfills a promise he made shortly after taking the reins of LIPA in 2007, and a request that year from state Comptroller Thomas DiNapoli. "There have been accusations that this contract was sole-sourced and that perhaps competition would generate savings for customers," Law said. "The only way to get that intelligence is to do a competitive procurement."

In a statement, DiNapoli said, "Competition for public contracts produces better quality and lower costs." He noted that Long Island customers, with among the highest electric rates in the country, "feel they are paying too much for too little."

"LIPA needs to get this contract done the right way," DiNapoli said, calling for "meaningful benchmarks and performance standards" and "real financial penalties for substandard performance."

National Grid said it was already reviewing the request for bids. Saying the company was "proud of our track record," for LIPA, National Grid spokeswoman Wendy Ladd said the company's experience, knowledge and commitment "make us an exceptionally strong candidate" for the contract.