Kessel's days at LIPA also being probed

A state investigation of New York Power Authority chief Richard Kessel's donations, grants and other expenditures has expanded to reach back to his days as LIPA chief, according to people interviewed for and briefed on the probes.

While the state inspector general's office originally was examining NYPA's charitable donations to a long list of nonprofits outside its service area, the inquiry now includes grants, contracts and other expenditures at both NYPA and the Long Island Power Authority, the sources said.

The inspector general's office is also continuing a separate investigation into LIPA's rate-making -- digging into how the authority sets rates and how transparent the process has been over the past dozen years. Those familiar with it say document requests reach back to LIPA's earliest days.

Critics have long argued that LIPA reclassified certain costs to categories that would not trigger automatic reviews by the Public Service Commission. A new law awaiting Gov. Andrew M. Cuomo's signature would require LIPA to submit for PSC review any annual increase of 2.5 percent or more.

John Milgram, a spokesman for Inspector General Ellen Biben, declined to comment on either the Kessel or LIPA investigations, other than to say they are "ongoing."

NYPA spokesman Michael Saltzman said, "We will continue to cooperate with the inspector general's office." LIPA spokesman Mark Gross declined to comment on either inquiry.

One person who was interviewed as part of the LIPA rates and practices review in recent weeks described the material being examined as stretching back more than a decade.

"They were asking questions pre-LIPA," the period in the mid-1990s when LIPA was being formed to replace the private Long Island Lighting Co., said the source, who asked not to be named because the probe is confidential. He said he provided information for both probes, including a grant LIPA made more than a decade ago.

When announced in April by Cuomo, the LIPA review was expected to look at whether LIPA was manipulating rates to avoid PSC scrutiny and to review recent excessive storm costs and $231 million in overcharges for "lost power" -- leaks from the system before power ever reaches a meter. "I think there's been a series of irregularities," Cuomo said at the time. "No one is alleging wrongdoing. But there are questions that deserve answers."

At the same news conference, Biben made a clear distinction between the LIPA and NYPA-Kessel probe. "There is an ongoing investigation relating to certain expenditures and grants by NYPA under Kessel," she said. "These are separate matters."

Kessel during a March NYPA board meeting strongly denied any improprieties and has not been accused of any wrongdoing. He was unavailable for comment.

Kessel served as LIPA chairman and chief executive from 1998 to 2007 after previously having held the chairmanship from 1989 to 1995.

LIPA has said it is cooperating fully, sending large volumes of documents and other information to forensic auditors and others. Department heads are expected to be interviewed in coming weeks, as were their NYPA counterparts some months ago, one source said.

Meanwhile, the NYPA board of trustees, which had been conducting its own inquiry into Kessel's donations, has temporarily suspended its investigation at the inspector general's request until the state probe is finished.

"The state people asked that they go first," said a person close to NYPA's board, who added, "They are clearly looking back to [Kessel's time at] LIPA."