LIPA won't get $51M state grant for new system

The Long Island Power Authority's decision last year to scrap a new storm-outage computer system in favor of one from PSEG came with a previously undisclosed cost: the loss of a $51 million state grant.

The disclosure came Wednesday at a meeting of the LIPA board during which trustees agreed, with some dissension, to approve $2.375 billion in new borrowing. Among the expenses the borrowing will pay for is the outage management system. Trustee Marc Alessi voted against the measure, which passed 5-1 with one abstention.

During a discussion about PSEG's work on implementing the new outage computer system, which helps the utility assign work and accurately report progress of restorations during storms, trustee Matthew Cordaro asked about LIPA's progress in securing the $51 million state grant to cover the cost. Gov. Andrew M. Cuomo announced the grant in a news release Oct. 24, saying it would "significantly upgrade Long Island's utility system."

LIPA vice president of finance Kenneth Kane said the grant "will not be coming."

The reason? Because "LIPA is not going to own the [computer system] assets ... LIPA will not qualify for a grant."

The 2013 Cuomo announcement of the grant came 21 days after LIPA trustees voted to abandon a system LIPA had been building with an outside contractor, one for which LIPA had spent $13 million. LIPA noted at the time that PSEG's system was superior to the one LIPA had been implementing, and PSEG said it could have its own system in place by July.

Each $36 million of cost is the equivalent of a 1 percent increase to LIPA customers.

The Cuomo administration noted that work on the new computer system is moving ahead. "Governor Cuomo secured $1.4 billion from FEMA for critical rebuilding and hardening projects on the LIPA electric infrastructure," spokeswoman Dani Lever said. "The upgrade to the Long Island outage management system is moving forward and the project will in no way impact the rate freeze currently in effect."

Last month, Newsday reported that PSEG missed the July deadline, and gave up a $1.2 million incentive payment it would have received as part of its contract with LIPA. The company said it expects to have the new system in place this month.

LIPA's current system, a throwback to the LILCO days and managed by National Grid, was viewed as a major problem in recent storms, most notably superstorm Sandy.

Also at the meeting, trustees approved a resolution allowing LIPA to issue up to $2.375 billion in new borrowing, adding to a debt load that tops $7 billion.

The offerings include up to $1.375 billion in electric system revenue bonds to pay for system improvements, underfunded PSEG-worker pension plans, new computer systems and refunding $675 million of existing LIPA bonds expiring next year.

Trustees also approved up to $1 billion in senior lien notes and commercial paper notes.

It's unclear how the borrowing will affect LIPA's average 2014 debt of $7.6 billion, because a large portion of the borrowings will displace existing debt.

Assemb. Robert Sweeney (D-Lindenhurst), who introduced the Assembly version of the LIPA reform bill, said he found LIPA's approval of the new borrowings "disturbing."

"It doesn't appear the debt will be going down anytime soon," he said, adding that he was particularly concerned that LIPA voted on the measure after only 24 hours of public notice. "It's a disappointment to me that unfortunately, some things never change."