PSEG takes over LI electrical grid Wednesday

PSEG-Long Island on Wednesday takes on the mammoth task of running the Long Island electrical grid with a pledge to build a top-ranked utility in five years.

The transition, two years in the making, puts the Newark company in charge of nearly every aspect of running the local electric grid. The job involves nearly 2,200 employees, a $446 million 2014 budget, and a host of carry-over employees and computer systems from National Grid.

LIPA as a public brand will largely disappear, its role reduced to monitoring the PSEG contract and other behind-the-scenes financial and legal operations.

David Daly, PSEG-Long Island's president, who recently moved to Hempstead, said he expected a smooth changeover, in part because many computer bugs and other potential glitches have been ironed out by starting the systems weeks ago.

"We're ready to go to hit the ground running," said Daly, who planned to work the night shift Tuesday night and New Year's Day welcoming employees and reviewing operations. "We know there are going to be some bumps in the road. We're confident they're going to be bumps and not craters."

For the time being, many of the back-office systems that ran LIPA will continue. PSEG-Long Island, under temporary agreements, will use National Grid's computer system for finance and accounting, human resources and procurement for one to two years until a new $100 million system can be put in place. Some 75 National Grid employees will operate those computer functions. The cost for the interim computer system itself is about $12 million a year.

National Grid will provide the computer payroll system for more than 2,000 employees for the time being. Customer bills will still be calculated and mailed using a National Grid system, which recently placed the company's gas customers into a different system.

It's not only PSEG that will be stepping into a new role. LIPA will also have a mostly new board, with Gov. Andrew M. Cuomo's appointee Ralph Suozzi, a Democrat and the former mayor of Glen Cove, as its chairman.

"My whole career has been solving problems," said Suozzi, who was defeated in November. "I'll be in a place where I can help the region."

LIPA itself has downsized as PSEG has stepped up.

The authority has 50 employees, and is seeking a new chief financial officer following Michael Taunton's departure last month. Several people close to LIPA have said current chief operating officer John McMahon could also step down this spring, after about a year on the job.

LIPA spokesman Mark Gross declined to comment directly on the reports, but said McMahon's appointment "was not limited in duration and Mr. McMahon will remain in that position as PSEG-Long Island commences operations" under the new contract. Gross said LIPA staff "expects to discuss authority management and succession planning with the new LIPA board."

In a statement, McMahon said LIPA customers "will see benefits from the arrival of PSEG-Long Island" in areas including storm response, clean-energy programs and day-to-day service reliability and customer relationships. Some clean-energy advocates criticized PSEG's decision to cut green-energy programs this year; PSEG says it will do the same work with less funding.

Daly said much of the transition work for the switch-over was done well in advance, but the late approval by the IRS granting LIPA's tax-exempt status meant some PSEG branding will take weeks to complete.

Only about half the fleet of vehicles will sport the PSEG brand as of Wednesday, while the remainder will be outfitted in the next two weeks. That also goes for signage at 11 existing customer walk-in centers across Long Island. A new center will be built this year in the Rockaways to service customers there. All employees required to wear them have already been assigned PSEG-Long Island logo uniforms and hard hats, and bills and other mailers will contain the PSEG logo, Daly said.

PSEG has spent the past year working on getting LIPA's new $31 million storm outage management system in place, and it's expected to be fully operational by July. In the meantime, a National Grid system will remain, Daly said.

Observers say the job PSEG has taken on won't be easy.

"When you do something this complicated and are depending on borrowed systems, utilizing new people or even the same people, it could be chaotic," said LIPA trustee Matthew Cordaro, who was named to the new board this week. If there are problems, they might show first at customer call centers, particularly if there are weather-related outages, he said.

"I wish them luck, but this is a very complex transition and fraught with problems," Cordaro said. "It could be a while for it to be up and running in anything resembling a flawless operation."

PSEG-Long Island spokesman Jeff Weir called it a "huge transition. We're doing everything we can to make it as seamless as possible."

Assemb. Robert Sweeney (D-Lindenhurst), who sponsored the LIPA legislation that put PSEG in the driver's seat, said he expected a relatively smooth transition.

"I'm not expecting significant problems," he said. "We understand some improvements in infrastructure are going to take some time but I would expect improvements in customer relations to happen quickly."

Daly said a new communications system that quickly directs customer calls to the proper destination will be installed by midyear, but changes in how the company responds to customers will be evident immediately.

Jeff Greenfield, a LIPA trustee, said he wasn't expecting major problems with the changeover.

"I'm confident that Dave Daly and his team have done a lot of homework to make it as seamless as possible," Greenfield said. "There could be one or two hiccups. I hope we don't get surprised."

An early test could come as soon as Thursday and Friday, with a predicted snowstorm packing gusting winds and potential accumulations of 6 to 8 inches.

The storm-response process is in place, and was tested earlier this month with staff from the state Department of Public Service, which will take on an oversight role of the utility and field customer complaints.

"We have our storm process at peak readiness," Daly said.