Letter: Nothing to gain by selling LIPA
This is a view of LIPA's Caithness power plant. The plant, located in Yaphank, is the utility's newest generating facility. (Jan. 20, 2010) Credit: Newsday / John Paraskevas
Newsday's editorial "First things first at LIPA" [Sept. 26] states that "Proceeds from a sale [of the Long Island Power Authority] could be used to reduce LIPA's debt, a significant factor in its high rates."
If a private company purchased LIPA, it would, of course, be looking for a return on its investment. That return would certainly be higher than the interest rate LIPA pays on its debt. Yes, LIPA's debt would be reduced and we wouldn't be paying interest on it, but ratepayers would end up paying more.
The Brattle Group report, prepared for LIPA, analyzed such a transaction and estimated that the additional costs to ratepayers would be more than $400 million a year if LIPA were privatized. That conclusion is logical and intuitive. To suggest that, somehow, money would appear from somewhere to pay down LIPA's debt without a corresponding financial obligation being incurred (and, at a higher overall rate of return, to boot) is wishful thinking.
The LIPA takeover was sold to the public in 1998 as way of taking advantage of tax-free financing to reduce the ratepayer burden associated with paying for the utility's past and future capital investments. Nothing has changed in the past 13 years to change the validity of that argument.
LIPA needs to make key decisions regarding who will run the transmission and distribution system and who will supply new generation resources that will serve the Island for decades.
The issue of privatizing LIPA has been openly discussed several times over the past decade. Each time, the conclusion has been the same: It doesn't make sense. It is time to stop rehashing this issue and let LIPA move on with these critical decisions.
Harry Davitian, East Setauket
Editor's note: The writer is president of Entek Power Services, which has a financial interest in the Caithness Long Island power project and is working to develop additional projects to supply LIPA with power.
