Cost of PSEG restoration/repairs more than $350 million, LIPA chief exec says

The tab for restoring power in the aftermath of Tropical Storm Isaias will top $350 million, a top LIPA official disclosed at a legislative hearing Thursday — leaving ratepayers potentially on the hook for as much as $90 million, depending on federal government reimbursement.

LIPA Chief Executive Tom Falcone said the utility "may be eligible" for up to $260 million in reimbursements from the Federal Emergency Management Agency, which also covered more than $1.5 billion in storm-repair and hardening costs for superstorm Sandy.

But LIPA trustee Matthew Cordaro said in an interview, there are few choices for who'll pay the balance. "That will be paid out of the ratepayers' pocket unless there's some special aid deal between LIPA and the state or federal government," Cordaro said.

The cost disclosure came at a sometimes-fiery joint session of the State Senate and Assembly on utilities' highly criticized response to the storm. Lawmakers questioned the performance of PSEG Long Island, which operates the system for LIPA under a long-term contract, as well as top executives' compensation, and even recent PSEG promotional mailers.

One lawmaker questioned the structure of the utility's operation, saying it hasn't worked in past iterations. 

“This has been déjà vu all over again,” said Assemb. Fred Thiele (I-Sag Harbor). “I wonder if the problem is the organization of how this is set up. … The public often doesn’t know who is responsible for what.”

Public Service Commission chairman John Rhodes said while PSEG and LIPA operate under unique “review and recommend” authority of the DPS, the state regulator had the ability to hold the utilities on Long Island accountable.

“At this point, the issue is whether we have the authority and the teeth to hold them accountable, and with this structure we do,” he said. 

Falcone took aim at PSEG’s outage management computer system, which PSEG Long Island president Dan Eichhorn blamed for cascading work logistics problems during the restoration. 

“The failure of these key systems is indefensible, regardless of the challenges of the storm or with third-party vendors," he said.

Sen. Todd Kaminsky (D-Long Beach), who co-chaired the meeting, called it “disturbing” that the money PSEG planned to spend to reimburse customers for spoiled food was coming from the same ratepayer-funded incentive bonus pool that PSEG agreed to forfeit, rather than a check from PSEG’s parent shareholder funds.

Rhodes said the state “pressed PSEG for reimbursement to come out of shareholder money. Forfeiting the incentive is the immediately available way to do that. We will continue the investigation,” and could impose further sanctions, he said.

Kaminsky also pressed PSEG's Eichhorn to disclose the executives' pay. Eichhorn, in response to the question, said that executives weren't paid more than $750,000 but balked when Kaminsky asked if that amount was more than $500,000. That was "something we consider confidential and personal [and] I do not feel comfortable sharing that right now," he said. 

Assemb. Steve Englebright (D-Setauket) pointed to a promotional mailer from PSEG received the day of the storm "celebrating" recently completed storm upgrades that promised customers reliable service for “years to come. Englebright asked if the DPS was “monitoring this propaganda” in light of the recent restoration failures. He also questioned DPS’s overall oversight of the utility.

“The oversight you are supposed to be providing has apparently also failed,” Englebright told Rhodes. “Meanwhile, the ratepayers have been giving them bonuses for their [PSEG’s] supposed preparation. So I’m skeptical. But that [oversight] certainly hasn’t been the track record.”

Rhodes said “obviously we don’t agree with the mailer,” but pushed back on a report that questioned the department’s monitoring function. “We are absolutely focused that in cases of the failures here that we get it we right,” Rhodes said, referring to holding utilities accountable. He noted that in the DPS probe of PSEG, "no outcome is off the table, including termination" of the company's contract with LIPA.

In other news at the hearing, an Altice official for the first time put a figure on the number of New Yorkers in its service areas that lost service: around 400,000 of the nearly 2 millioncustomers at the height of the storm, according to testimony by Altice Chief Operating Officer Hakim Boubazine. 

Altice, like PSEG and other utilities, was issued a notice of apparent violation from the Department of Public Service for its“wholly inadequate” response to the storm. The state said it understood that “many thousands” of customers remained without Optimum service as late as Aug. 16.

Boubazine cited power loss as a major cause of the service outage.

“In this recent storm, as is usual, the vast majority of our customers lost our services due to the loss of commercial power,” he said. “As commercial power was restored, the majority of our customers came back online.”

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

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