NYPA to begin reviewing LIPA power contracts

The New York Power Authority is preparing to take a comprehensive look at the Long Island Power Authority's portfolio of power contracts in an effort to cut costs and improve terms, according to a state source with knowledge of the deal.

The aim, according to one of the sources, is to exhaust all legal means to improve the contracts, some of which have been criticized as costly and unproductive. Other state entities also may be employed to bring similar scrutiny to other elements of LIPA's contracts, including dozens of outside consulting contracts, the sources said.

According to one state source with knowledge of the plan, NYPA has formed a small team of experts in the fields of power resource planning, acquisition, finance and legal work to conduct the review. This phase of the plan, working with LIPA's power markets group, will review LIPA's portfolio of power purchase agreements and make adjustments within legal constraints. The work, which the source said was at LIPA's request, is scheduled to start soon.

The action comes as Gov. Andrew M. Cuomo is exploring various changes for the embattled authority, including possibly selling it to a private company. Newsday in December reported that several LIPA power contracts have raised red flags, including one for nearly $1 billion that restricts LIPA from buying energy from a Pennsylvania plant except in the rarest of emergency conditions.

According to one state source, other LIPA contracts also will be scrutinized, including the pending $3.7 billion contract for PSEG to manage the Long Island electric grid, which is slated to start in January.

Spokespeople for LIPA and NYPA didn't respond to requests seeking comment.

NYPA, the White Plains-based public utility that provides power to businesses and municipalities throughout the state and owns 16 power plants, has been an increasing presence at LIPA. NYPA chief Gil Quiniones has been a visible advocate for Cuomo's plan to reform LIPA, which initially focused on privatization. NYPA staffers have been embedded at LIPA during the last two major storms. And the Moreland Commission, empaneled by Cuomo to review utilities' storm performance, reported in January that the state had considered an NYPA takeover of LIPA -- an option that was rejected.

Outside scrutiny of LIPA is nothing new. For nearly two years, the state inspector general has been investigating LIPA at Cuomo's request. Findings from the work, which have not been publicly released, were turned over to the Moreland Commission, a state source confirmed.

LIPA is also mandated by a 2011 state law to undergo a comprehensive management audit overseen by the Public Service Commission, but one source familiar with it said the work was put on hold. James Denn, a PSC spokesman, said, "No decision has been made as to whether to put the audit on hold."

State Assemb. Robert Sweeney (D-Lindenhurst), sponsor of the bill that mandated the audit, said he had heard unofficially that it was in a holding pattern. "It is the law," he said. "It's something they're supposed to be doing. . . . If there's a good reason for not doing it, let's hear it."

Sweeney said Assembly members who met with Cuomo's LIPA reform officials two weeks ago have yet to receive paperwork on potential new structures for LIPA.

State Attorney General Eric Schneiderman is also reviewing LIPA and other utilities' performance during superstorm Sandy. The Moreland Commisson is expected to continue its work through March.

One newly named LIPA trustee said he welcomed the latest review of LIPA contracts.

"If they can find potential savings for the ratepayers that have been overlooked, I welcome it," said Matthew Cordaro, who last week was appointed to the board by Assembly Speaker Sheldon Silver.