NYS AG approves LIPA-PSEG contract extension; it now goes to state comptroller

New York Attorney General Letitia James’ Office has approved a contract extension between LIPA and PSEG Long Island amid allegations of irregularities in the procurement process.

James’ approval, disclosed by LIPA in a recent state court action seeking to dismiss a lawsuit by Quanta Services, another bidder, leaves only the state comptroller as the final green light needed for the contract to move forward.

Quanta, which was recommended for its "strong" bid by an internal LIPA review committee to win the 10-year contract, was nevertheless rejected in a 6-1 vote by LIPA trustees, who instead voted to continue with PSEG to operate the grid for five more years. The review committee had found PSEG didn’t meet the bid’s minimum requirements, according to LIPA documents, .

James' office confirmed it reviewed and advanced the contract to the state comptroller's office, but noted the process isn't final until the comptroller gives his approval.

A spokesperson in James' office noted its purview concerning state contracts is limited to whether the terms of the contract are reasonable for the state to enter into, and did not include consideration of state or ethics probes of LIPA or bidding allegations. 

A spokesman for Comptroller Thomas DiNapoli didn't respond to a request for comment. 

A separate state investigator, the inspector general, since the spring has been probing the utility, Newsday has reported, and has received testimony from a now former employee who in June filed an ethics claim alleging he was pressured during the procurement to lower bidding scores for Quanta on five occasions, among other charges. The inspector general doesn't comment "on the existence or status of investigations," spokesman Michael Cook wrote in an email. Newsday has spoken with at least three people who have testified in the probe. 

Newsday also previously reported an activist for the Long Island Progressive Coalition, among others, more than a year ago brought concerns about PSEG lobbying to the attorney general's office, which confirmed the complaint but said it wasn’t pursued at the time, because of "jurisdictional issues." PSEG has not been accused of any wrongdoing.

At least three people familiar with allegations in the LIPA case have brought their concerns to the U.S. Attorney's Office on Long Island, according to one of them. That office also doesn't confirm or deny the existence of investigations. 

LIPA’s motion to dismiss Quanta’s entire case last Friday follows a court victory last week in which acting Nassau District Court Judge Phillipe Solages denied Quanta’s request for a temporary order to forestall the PSEG contract award. Quanta alleges the process was unfair and "unlawful" and that LIPA has "stonewalled" all its formal attempts to receive documents to get to the root of its decision. LIPA's motion to dismiss asks the court to reject Quanta's request for expedited discovery. 

The motion to dismiss raises many of the same issues LIPA used to defeat the temporary order to delay the contract, arguing Quanta’s filing is beyond the four-month statute of limitations and its bid to operate the grid was effectively ended when the board voted April 30 to reject it.

"Quanta seeks to conflate the two [LIPA board] resolutions into one determination to bootstrap an untimely challenge to the April 30 decision to a timely challenge to the May 22 decision," LIPA’s outside lawyer Evan Krinick wrote. "This court should not be fooled by Quanta’s sleight of hand."

A Quanta spokesman didn’t respond to a request for comment.

Newsday has reported that, in addition to the five requests by a state-appointed official to lower the scores for Quanta in the bidding review, former LIPA senior vice president Billy Raley also testified to the inspector general about large packets of information that were distributed to trustees in a closed-door meeting in advance of their April 30 vote. The packets were largely critical of Quanta’s joint-venture partner Luma and its performance for the Puerto Rico electric grid. Raley said he spent time vetting information in the packets, which he said he found to be misleading or untrue.

It's unknown who created the packets, which were given to board members after the best and final offers from both companies were submitted to LIPA. Raley was fired in September, a day before the PSEG contract extension was approved by the board, allegedly because he refused to sign off on easier performance metrics for PSEG. LIPA has declined to comment on his firing.

Editor's note -- This story has been updated from an earlier version.

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

Mark Harrington, a Newsday reporter since 1999, covers energy, wineries, Indian affairs and fisheries.