LIPA trustees face $600M pension liability

With a decision about LIPA's future structure expected in just weeks, authority trustees are confronting a decade-old contract dispute that could leave ratepayers on the hook for up to $600 million in future retiree pension costs.

The revelation, shared with most trustees just last week, comes as a State Senate committee on investigations is meeting Thursday morning to question officials at LIPA and other utilities about the response to Tropical Storm Irene. The meeting, at 9:45 at the Nassau County Legislature in Mineola, precedes a LIPA trustees meeting at noon at its Uniondale headquarters. Both are open to the public.

In addition, 17 of the 18 members of the Suffolk County Legislature last week wrote Gov. Andrew M. Cuomo to ask him to delay the Oct. 6 decision about LIPA's future structure for two months to more deeply probe its implications and open it to public hearings. A spokesman for Cuomo didn't immediately reply to a request for comment.

Trustees were confronted with questions about the retiree pension costs during an outside consulting group's exploration of the possible costs to LIPA of future structures. Although they determined that the pension liability won't affect the decision, the issue prompted discussion about how LIPA would fend off any effort by its contractor, National Grid, to turn to LIPA to fund the liability, according to several trustees.

LIPA has asserted since 2000 that the pension costs, originally $250 million in benefits for former Long Island Lighting Co. workers, rested with the former KeySpan. National Grid bought KeySpan in 2007. People familiar with more recent estimates say the pension funding obligations ballooned over the years because of Wall Street declines and other economic factors.

LIPA trustee Larry Waldman said trustees were first confronted with the pension-cost dispute after The Brattle Group, a consulting firm hired to recommend a future structure for the authority, examined the costs for several different future scenarios for LIPA.

Though LIPA officials have assured trustees the pension issue won't impact the decision about LIPA's future structure and that LIPA isn't responsible for the cost, it still looms large as new regulations require that retiree pension plans be properly funded for future benefits.

Waldman said that although he didn't know specifically how much the liability may have increased, he said he expects it has grown markedly.

It's unclear whether National Grid has asserted that the costs of the pension plan rest with LIPA. A spokeswoman declined to comment on the benefits matter, "given the pending LIPA [contract] procurement process," she said.

LIPA spokeswoman Vanessa Baird-Streeter, in a statement, indicated the cost rests with National Grid.

"National Grid . . . carries the liability for these plans on its books," she said. "LIPA has made all payments required by the contracts to date. We do not expect any lump sum payment to be due at the end of the . . . [contract]."

But trustees view it differently. "It's a huge number. . . . It needs to be resolved," trustee Neal Lewis said.

Robert Shand, business manager for Local 1049 of the International Brotherhood of Electrical Workers, which represents thousands of National Grid workers, said, "While it is my understanding that the National Grid pension plan is funded up to and over the [federal] requirements, there is some continued discussion over future obligations."

He added, "It is my opinion that all these questions need to be answered" before a contract to manage the local grid is awarded.