LIPA trustees unanimously OK PSEG-Long Island takeover

LIPA trustees approved Thursday the centerpiece of Gov. Andrew M. Cuomo's effort to reform the utility, giving near-total control of the local electric grid to PSEG-Long Island.

But a handful of ratepayers, activists and even a trustee took the governor to task for his methods in dismantling LIPA, enacting the reform act and installing New Jersey-based PSEG.

Trustees ultimately passed the measure by a 9-0 vote, with one abstention, leaving only the approval of the Internal Revenue Service to finalize the 12-year agreement, which can be extended for another eight. The contract details the greater responsibilities the utility will assume, including budgeting, storm response and capital projects.

Most trustees spoke positively about LIPA's future under PSEG, which begins in January, and even some who were critical of the contract said they believed ratepayers will be considerably better off under a PSEG-run utility.

But trustee Suzette Smookler, who voted to approve the contract, nevertheless offered sharp criticism of Cuomo in a statement before the vote. Smookler noted that the governor has failed to fill his full slate of nine LIPA board seats during his term (five trustee seats remain vacant), and similarly never filled a long-vacant chief executive post.

She further criticized the governor for treating LIPA and its board with "disdain" in the aftermath of superstorm Sandy, and muzzling LIPA from rebutting criticism. In an interview, Smookler charged that the Cuomo administration restricted LIPA officials and trustees from responding to public broadsides that the governor lobbed in the storm's aftermath. "It was vicious," she said.

Cuomo, in a statement Thursday, praised trustees for approving the contract, calling it "a major step forward in providing Long Island ratepayers with improved utility service while keeping rates low."

One activist at the meeting accused Cuomo of rushing the legislation into law and called the process "a disgrace." Peter Maniscalco, founder of a Long Island coalition that opposed the contract, accused Cuomo of making a false statement when the governor said the original intent for LIPA was to be a "holding company." Maniscalco is among those who want LIPA to be a fully public utility.

Paul Lozowsky, director of the Utility Consumer Advocacy Project in Patchogue, predicted that a PSEG-controlled LIPA will be hobbled by LIPA's nearly $7 billion in debt, which limits spending. His solution? "We have to default on it."

Cuomo's administration was represented at the meeting by Richard Kauffman, the state's chairman of energy policy and finance, and newly appointed Public Service Commission chairwoman Audrey Zibelman, who praised PSEG as "one of the best utilities I've ever seen operate."

Even if PSEG never meets anticipated efficiencies from operating LIPA, Zibelman said the average consumer would only face an additional cost of 87 cents a month. "We feel very comfortable that the [PSEG contract] is exactly where we need it to be," she said.

Trustees at the meeting also approved a measure for LIPA to begin the process of refinancing some of its debt under new terms to produce ratepayer savings.

Officials said that only around $1.5 billion is likely to be refinanced under an expected new AAA rating, compared with the $2 billion to $3.5 billion originally touted under Cuomo's LIPA reform plan. Interest rates are rising, and only a certain amount of the debt can be securitized favorably, officials said.Once it happens, ratepayers will see a new securitization line item in their bills, representing the costs to refinance and related fees. LIPA chief financial officer Michael Taunton said the per-kilowatt charge will be about $1 a month for the average consumer, and noted that the refinancing is expected to provide savings that will offset the costs.