Devilish detail in Cuomo’s latest LIPA plan – By George J. Marlin

The following appears in the May 24-30, 2013 issue of the Long Island Business News:

Gov. Andrew Cuomo has dropped his demand that LIPA be privatized, opting instead to restructure the agency into what it was originally intended to be – a holding company with 20 employees or so to oversee financing and debt management.

The board would also be reduced from 15 to 5 members, with trustees required to have utility, corporate or finance backgrounds. Political hacks, in other words, need not apply.

As for the rest of the plan, the devil is in the details and there are plenty of them in the 70-page bill introduced in the state Legislature.

Under the reorganization plan, LIPA and its service provider, Public Service Enterprise Group, would be under the thumb of a new Long Island office of the New York Department of Public Service. DPS would perform operation audits and “make recommendations with respect to the operations and terms and conditions of service and rates and budgets established by LIPA and/or its service provider.” In other words, DPS would have the final say on rates.

Many of LIPA’s general powers will be repealed and transferred to the service provider, which would manage as well as operate the authority’s electric transmission and distribution system. The service provider, not LIPA, would develop and propose construction and capital project programs.

The legislation permits the PSEG contract, which is to commence in January, to be amended to reflect these changes.

Big question: Why was the state comptroller cut out of the process to review and approve the contract changes?

Even bigger question: Since these significantly expanded responsibilities are not included in the current PSEG contract, wouldn’t it be prudent for LIPA to issue a new request for proposals? The new management structure may attract any number of qualified providers who might be willing to charge less for their services.

The 1998 enabling legislation permitting LIPA to take over the old Long Island Lighting Co. included a political payoff subsection that required LIPA to make payments in lieu of taxes “to municipalities and school districts equal to the taxes and assessments which would have been received year to year by each such jurisdiction.”

As a result, LIPA’s Port Jefferson station, which was in operation for less than a week last year, pays an outrageous $25 million in PILOTS annually.

The new proposal maintains the unfair LIPA payments to local municipalities – now $586 million annually. It does, however, limit future increases to 2 percent annually on LIPA-owned land.

The Cuomo legislation would also create a new entity, the Long Island Power Refinancing Authority, with an oversight board of three trustees appointed by the governor.

The authority will be empowered to issue securitized bonds whose proceeds would be used to redeem and defease the $3 billion of LIPA’s debt that can be refinanced at better rates.

The new debt could save as much as $30 million annually and might give LIPA enough breathing room to afford the governor’s proposed three-year rate freeze.

The “securitized restructuring” is plainly another scheme to extend the repayment of debt for past follies. Instead of paying off the Shoreham debt in 30 years, ratepayers will be charged for it for a total of 45 years. In other words, it will take more than two generations to pay off the Shoreham mess created by Govs. Mario Cuomo and George Pataki and their political cohorts.

If this proposal is signed into law, elected officials, not LIPA customers, will be the primary beneficiaries. If there is another major blackout, the pols will be able to pin the blame on the service provider. Meanwhile, ratepayers will get hit with a huge jump in electrical charges the day after the rate freeze expires.

But that’s OK for state-elected officials because the increase will occur after their next election cycle.

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