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LIPA oversight bill vetoed by Paterson

Gov. David A. Paterson on Friday vetoed a bill that would

have required the Long Island Power Authority undergo regulatory review for

rate increases above 2.5 percent, dashing hopes for greater oversight of the

utility.

In vetoing the bill, Paterson said it would cost the Public Service

Commission more than $5 million annually to implement it, and the PSC "lacks

the resources." He also expressed concerns it would "impair and diminish" the

value of financial agreements LIPA made with its bondholders, among other

concerns.

The veto follows unusual bipartisan support for the legislation after it

languished for years in Albany.

Critics point to increases in homeowners' LIPA bills created by "fuel

surcharges" exceeding 30 percent over the past five years, with virtually no

scrutiny of the utility.

State Sen. Kenneth LaValle (R-Port Jefferson) on Friday said he'll revive

it. "We're not going to go away on this issue," said LaValle, the bill's Senate

sponsor, adding he hopes to resubmit it before year end. "It's too important."

LIPA lobbied hard against the bill, saying it would have increased

borrowing costs and forced it to hire more staff to document increases for

state regulators.

Two rating agencies, Fitch and Standard & Poor's, issued negative outlooks

for LIPA debt after news of the legislation came to light, though neither

lowered their rating.

Assemb. Robert Sweeney (D-Lindenhurst) said LIPA elicited the concern from

the credit agencies by alerting them to the legislation. LIPA "went to the

rating agencies and campaigned against the bill," he said, arguing that

management's efforts to defeat it follows a pattern at LIPA.

"My experience with LIPA is they've talked a good game in terms of wanting

accountability and transparency, but when push comes to shove they always find

reasons not to do it," Sweeney said.

LIPA chief Kevin Law said Paterson "did the right thing" in vetoing the

bill, "and I support his decision." Calling the bill "well intentioned," Law

said it had the "unintended consequence of increasing costs for ratepayers." He

said he'd work with the legislators to find "other ways" to address their

concerns.

Sweeney said rate increases such as the two LIPA has implemented this year,

including a 3 percent hike this summer, necessitate scrutiny.

"There's a desperate need for oversight at LIPA, especially considering the

high rates we have," he said. "You'd think that LIPA would want that oversight

to demonstrate to the public they're not playing games."

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