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LIPA votes no rate hike, picks new operating officer

LIPA trustees appointed current chief financial officer Michael

LIPA trustees appointed current chief financial officer Michael Taunton to be the new chief operating officer. (Dec.17, 2012) Credit: Newsday Audrey C. Tiernan

LIPA trustees on Monday approved a budget that holds rates steady, voted to give residential customers a $5 storm-related credit next month and appointed a new chief operating officer.

Michael Taunton, who also remains LIPA's chief financial officer, will replace Michael Hervey, who will resign at the year's end.

The board's action on the $3.6 billion budget left until next year a decision on how LIPA would recover up to $250 million in restoration costs from superstorm Sandy that may not be covered by federal reimbursements.

LIPA officials said they have been told the federal government could reimburse up to 100 percent of the $950 million in estimated costs. The trustees, at the meeting, also approved several forms of potential borrowing and credit to help fund operations while waiting for the reimbursements, which could take a year or more. Any unfunded portion of those costs will need to be recovered through rates, probably over 10 years, said board chairman Lawrence Waldman.

LIPA on Monday approved about $5 million in service-charge credits to customers tied to outages from Sandy. All LIPA customers with meters -- even those who didn't lose power -- will receive credits of about $5 in January, while commercial customers could see credits of around $140.

The credits respond to critics, and a lawsuit, that charged customers shouldn't be hit with a fee for service they never received.

Taunton joined LIPA as its top finance officer in January, from Arrow Electronics, where he was vice president and treasurer. He previously had spent 30 years with KeySpan Corp. and its predecessor companies as senior vice president, treasurer and chief risk officer.

Under LIPA rules, Taunton as chief operating officer assumes chief executive responsibilities until a CEO of the authority is named. The permanent chief executive spot has been vacant for two years, and Gov. Andrew M. Cuomo has not proposed a permanent replacement. Trustees make the formal CEO appointment, with confirmation by the State Senate.

In an interview, Taunton said his objective in the new role is to stabilize LIPA for financial markets, customers and employees. Hervey, a 12-year LIPA veteran, called his upcoming departure from LIPA "bittersweet."

While LIPA had been criticized for communications and other problems during Sandy and Tropical Storm Irene, LIPA also ushered in significant changes under his leadership. The authority challenged its high property tax rates, implemented bills with monthly rather than annual fuel adjustments and awarded a contract to manage the electric grid to PSEG of New Jersey.

The contract has been managed by National Grid, which oversees just about all LIPA operations, including billing, storm restoration and the much-criticized outage management system. LIPA under National Grid has been among the lowest ranked utilities in the nation for customer service.

Hervey noted that under LIPA's existing contract, LIPA assumes responsibility for branding and communications. But that will change under the new contract, which takes effect in January 2014.

While Cuomo's administration has signaled changes in LIPA's structure, Hervey said LIPA will continue working on the transition to PSEG. "We're executing the contract we have," he said.

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