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Comptroller study rebukes LIPA practices

The 10-year increase in electric bills is highlighted

The 10-year increase in electric bills is highlighted in the context of LIPA's original mission statement to keep soaring rates in line. (2011) Credit: Ed Betz, 2011

LIPA customers are paying an average of $463 more a year for electricity than they did 10 years ago while nearly half of LIPA's staff is making more than $100,000 a year, according to a study to be released Wednesday by state Comptroller Thomas DiNapoli.

The 10-year increase in electric bills is highlighted in the context of LIPA's original mission statement to keep soaring rates in line.

"LIPA was established to control electricity costs on Long Island, but residents' bills have consistently outpaced those of other utilities in New York State, the Northeast and the United States," DiNapoli said in a statement. "A review of LIPA's rate growth, high-paid executives and heavy debt load demonstrate a change is needed."

He noted that some of the increases in customer electric bills were as much as $52 a month over that 10-year period.

The DiNapoli report comes against the backdrop of a "reform" initiative at LIPA by Gov. Andrew M. Cuomo's office. Among the possible changes he and his staff have broached: a reduction of "bloated" LIPA staff, a return to LIPA's "holding company" origins, and delegating some of LIPA duties to other state agencies and contractors.

LIPA chief operating officer Michael Hervey said the authority was addressing many of DiNapoli's criticisms, though many were tied to costs beyond the authority's control. LIPA's estimated that property taxes alone are expected to total $573 million in 2012. LIPA has filed grievances to contest taxes at nearly all those assessments.

Nevertheless, Hervey said, "Customers have been looking for change and we are in the midst of the biggest changes customers have ever seen at LIPA," including awarding the grid management contract to PSEG in 2014 and finding "synergies" with other state agencies.

The DiNapoli report takes issue with the roughly 35 percent of LIPA contracts that it found were not competitively bid. LIPA has a total of 279 active procurement contracts valued at nearly $15 billion. About 35 percent that were not competitively bid represent more than $5.2 billion in value. About half of the amount was a single management service contract with National Grid.

That contract, after competitive bidding last year, was awarded in December to PSEG.

"We've been phasing out the original large sole-source contracts that LIPA started with and are replacing them with competitive contracts," Hervey said.

The report takes issue with the nearly half of LIPA's staff who earn $100,000 or more a year, noting recipients include six vice presidents and 32 directors; 49 of LIPA's 105 full-time employees at the end of 2011 made that amount.

By comparison, the report notes, only 13 percent of all state authority employees earned total compensation over $100,000 in 2011, while 8.3 percent of state employees and 13 percent of New York residents earned that amount.

Hervey said LIPA salaries are the equivalent of executive-office level pay at private utilities, but when salaries at LIPA contract-workers are included, there was a more "normal pay distribution."The DiNapoli report notes LIPA's poor track record in budgeting for storms. From 2001 to 2009, the report says, LIPA's actual costs in responding to storms were 80 percent over budget. That figure jumped to 385 percent over budget in 2011. Newsday and others have reported many of the costs were incorrectly classified, overly expensive or improperly billed.

Hervey said LIPA has acknowledged under-budgeting for storms after a review by DiNapoli two years ago, and he noted LIPA recently increased its storm budget to get closer to anticipated costs.

The report notes LIPA's $6.8 billion in debt, the interest on which consumed about 16 percent of the authority's annual revenue for fiscal 2012. Last year, LIPA chairman Howard Steinberg introduced a plan to cut LIPA debt by $2 billion by 2020.

The report doesn't mention efforts by the governor's office to reform LIPA, but says, "Current efforts under way to improve results for LIPA's ratepayers, such as the Public Service Commission's review and oversight, are much needed and long overdue."

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