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Editorial: State's finding is a good start to remake LIPA

A Long Island Power Authority in Belle Harbor,

A Long Island Power Authority in Belle Harbor, Queens. (Nov. 12, 2012) Credit: AP

It's hard to argue that superstorm Sandy, with the death and destruction it brought, did us any favors. Even for the communities and residents who didn't suffer tremendous damage, the power outages, school closings and gas shortages were trying. But if, as now seems likely, the Long Island Power Authority's response to the storm becomes its undoing, we could be giving Sandy a bit of credit.

LIPA is overly politicized, incapable of communicating well with customers and inefficient at the best of times. But it took the worst of times to create the possibility of change. The question, however, is why a community that endured the high rates and incompetence of the Long Island Lighting Co., LIPA's publicly traded predecessor, would believe another for-profit utility would do better.

Yesterday, a Moreland Commission -- one of several investigative panels created by Gov. Andrew M. Cuomo in Sandy's wake -- reported back with a series of recommendations that was, in part, an answer to that question. The group concluded first that the Public Service Commission, now understaffed and largely impotent in its attempts to oversee the state's private utilities, must be vastly strengthened. That would allow the privatization of LIPA, the separation of ownership and operations that make it so dysfunctional, and better oversight of the state's other utilities, too.

That's all a tall order, but a good one. Market forces and state regulation are the best bets to turn LIPA into a power company Long Islanders can count on. The commission concluded that the other major change considered -- making LIPA a truly municipal power company -- is unworkable, because it would add 2,000 employees to the state's pension system while putting limits on executive pay that make it impossible to attract top-notch leadership.

The commission estimated that a sale of LIPA would pay off about $4 billion of the $7 billion in debt the authority still carries as a legacy of the Shoreham nuclear power plant. That would leave ratepayers responsible for the remaining $3 billion.

Structuring any deal so that this debt stays municipal -- and thus tax-free for bondholders and low-interest for ratepayers -- is a manipulation that must be handled delicately. So is working through a 10-year contract, set to kick in next year, that has PSEG of New Jersey taking over from National Grid as the power supplier for LIPA. With all the problems that became evident when Tropical Storm Irene hit in 2011, the state should have taken a more proactive approach to reforming LIPA even before Sandy redoubled concerns. The contract with PSEG, with so much unsettled, should never have been finalized.

These changes, in both the PSC and LIPA, must be superbly executed, but a strong PSC and a well-run private utility are Long Islanders' best chances at a competently delivered power supply -- and Cuomo's best shot at disarming a complex problem.