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Some LIPA trustees oppose $325.4M rate-hike proposal, but say law limits their ability to object

Members of the LIPA/PSEG board address ratepayers and

Members of the LIPA/PSEG board address ratepayers and trustees on June 26, 2015. Credit: Johnny Milano

As the LIPA board prepares to review a state-blessed $325.4 million rate-hike proposal Monday, some LIPA trustees say they are opposed to the increase but are constrained by the LIPA Reform Act from voting to reject it.

LIPA trustees will meet in Uniondale on Monday to discuss a final recommendation from the Department of Public Service that will see the delivery charge portion of bills increase 1.5 percent, 3.8 percent and 3.8 percent over the next three years, respectively. That will allow LIPA and PSEG Long Island to increase rates to collect a total $325.4 million in new revenue by the end of 2018.

"Not only do I not like it, I am strongly opposed to it," trustee Suzette Smookler said in a written statement to Newsday. "I cannot support the recommendation because I am not comfortable that the important work that needs to be done can't be done less expensively or with no increase."

Added trustee Matthew Cordaro: "I have some doubts about whether the recommendation has achieved the lowest possible rate." But, he noted, "The way the LIPA Reform Act is constructed we can't opine on that. We have very narrow grounds for objecting."

Automatic approval

Under the act, the recommendation is automatically approved unless the LIPA board makes a "preliminary determination" that the state-approved hike is "inconsistent" with one of three very narrowly defined standards. Only if the board finds the increase is inconsistent with LIPA's "sound fiscal operating practices," the provision of "safe and adequate service" and "contractual or operating obligations" would the process be stopped to allow for public hearings within 30 days. Then, after negotiations with the state and PSEG, the board would present its final recommendation by year's end.

However, a senior LIPA official disputed the notion that the LIPA Reform Act constrains them from voting against the increase.

"Our trustees have complete discretion to review this record and to see if there's a rational basis from facts and evidence in that record to come to different conclusions than the DPS reached," the official said. He added, "They have to follow the statute in doing so."

'This is on autopilot'

But at least three trustees said that after discussing their options with LIPA attorneys and other staff, they felt their options were limited.

"I am very disappointed by the lack of discretion that this board has to take any action on this recommendation," Smookler said. "The act doesn't require an up-or-down vote on the recommendation, and without any action it moves ahead as if approved."

"This is on autopilot and the ratepayer has no real voice but ours," Smookler said.

Cordaro said the process is so narrowly defined that he doesn't believe it would allow him to raise the concern that rates could be lower. Indeed, he said, he was advised by LIPA staff that offering a resolution for "inconsistency" could actually result in a rate increase -- precisely what he doesn't want.

"I wouldn't want it to go in the other direction where the rates would be increased," he said. "It is designed so that the only thing we can do in response to the DPS recommendation is to raise rates further, which doesn't make us the guardian of the ratepayer."

Trustee Jeffrey Greenfield, who had a prior business obligation and will not be at Monday's meeting, said he was disappointed the process didn't at least allow the board to conduct its own findings on the state recommendation.

"I'm not in a position to object [to the increase], but I would have advocated that we hold our own hearings," Greenfield said.

Not all trustees are opposed, and it is expected that the five men Gov. Andrew M. Cuomo appointed to the board will support the DPS recommendation.

One of them, Mark Fischl, said, "Nobody likes increases in rates." But he added that financial reforms from the increase could help LIPA reduce costs. "My hope is it will cause rates over the long term to go down," he said.

The four other Cuomo appointees didn't respond to requests for comment.

Plans to refine law

Local lawmakers, including some who recently and unsuccessfully sought to stop the rate-hike proceedings over constitutional and oversight concerns, say the language that appears to limit the LIPA board's role needs to be changed. Assemb. Fred Thiele (I-Sag Harbor), who voted against the LIPA Reform Act, said he will introduce "comprehensive" legislation to reform the act early next year.

"The legislation we're looking at certainly would attempt to address the issue of LIPA having a very, very narrow scope of jurisdiction" in reviewing the DPS recommendation, Thiele said. "No one is there protecting the public interest, and part of that is the limitations put on LIPA" trustees.

Assemb. Edward Ra (R-Franklin Square), who voted for the LIPA Reform Act, agreed, saying he'd support a bill to further define trustees' role to vote on ratepayers' behalf, and to formalize oversight of the utility. DPS has review-and-recommend authority, but he and Thiele would propose direct oversight with Public Service Commission jurisdiction. "Having more direct authority, more so than just recommendations, would be helpful," Ra said.

State Sen. Kenneth LaValle (R-Port Jefferson), who voted for the LIPA Reform Act in the Senate, said he believed there should be an up-and-down vote by trustees. And while he supports "fixes" to the act, he stopped short of saying it needs to be scrapped. "We just put this in place," he said. "We don't want to make a knee-jerk reaction."

No vote expected

LIPA on Monday will brief trustees on the rate recommendation, but the board is not expected to have an opportunity for trustees to vote yes or no on the state recommendation, a move Cordaro said makes it more difficult to express his displeasure on the final rate hike.

"I was looking forward to having a resolution we could vote on," he said. Had the board offered such a resolution, Cordaro said he would have opposed the $325.4 million increase.

PSEG Long Island could still short-circuit the rate process. The company, which had sought a $387 million revenue increase, under its LIPA contract has until Monday to file for binding arbitration to make its case for a higher amount, and the outcome would be final. A spokesman declined to comment.

Either way, LIPA trustees would still have to vote on a final 2016 budget, including whichever increase survives, in December, but rejection of the budget is considered unlikely.


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