The following appears in the August 21-27, 2015 issue of the Long Island Business News:
In March 2013, I wrote a feature essay for LIBN titled “L.I. Power: The Political Hot Potato” describing decades of awful policy decisions made by cowardly state officials concerning the generation distribution and maintenance of our electrical power.
Claims by two governors, Mario Cuomo and George Pataki, that state control—AKA LIPA—would lead to better accountability and transparency proved to be false. LIPA became a dumping ground for the relatives of the politically connected seeking high paying jobs and, by 2013, LIPA customers were paying $460 more for electrical power each year than they did 10 years earlier.
The effects of years of neglect that became evident in the aftermaths of Hurricane Irene and Hurricane Sandy forced Gov. Andrew Cuomo to find scapegoats and to make major changes.
True to form, the governor appointed a Moreland Commission to confirm his pre-determined position. In a hastily prepared 16-page preliminary report released in January 2013, the Commission concluded that LIPA was dysfunctional and the best option was to convert to an investor-owned utility. In other words, he wanted it structured like the old Long Island Lighting Company that gave us the disastrous Shoreham nuclear plant.
This proposal may have been the governor’s way of tossing the “hot potato” to a third party, but financially it made no sense. A private entity would have to issue taxable debt which would cost ratepayers more in interest payments and it would not be eligible for FEMA reimbursements enjoyed by the state agency.
Discarding the privatization plan Cuomo signed into law LIPA legislation in June 2013 that he insisted would dramatically revamped the electric utility. The new entity would “focus on improving customer service including stabilizing rates and enhancing emerging response and preparation, reduce the cost of LIPA debt, and implement tough state oversight for the new utility company.” The governor also boasted that his reform would “achieve savings to allow the new utility to seek a rate freeze for 2013, 2014 and 2015.”
However, a report issued in July by State Comptroller Tom DiNapoli, Long Island Power Authority by the Numbers,” disputes Cuomo’s 2013 claims.
The DiNapoli study concluded that, “so far the long-overdue improvements promised to LIPA ratepayers have yet to be achieved…. Ratepayers are not benefitting from regulatory oversight, access to information and control mechanisms [and] LIPA ratepayers face higher bills, bear a debt burden that is projected to increase, and, in some ways, have less transparency and accountability regarding their electric service provider than before.”
The governor’s pledge to freeze rates for three years was a rouse to get through the 2014 election cycle. Days after he signed the LIPA legislation the agency announced a 4 percent hike in monthly customer bills. When asked about it, a Cuomo spokesman gave an Orwellian newspeak answer.
The promised freeze was redefined as a goal and “LIPA rates constitute the electricity delivery charge only, and do not include the power supply charge.”
That distinction was not made at the bill signing party. And readers should know that there were up to that time only two “rate” increases since LIPA took over in 1997. The countless other increases were all fuel related.
As for LIPA’s bonded debt: the 2013 legislation authorizing the one-time restructuring of $2 billion of LIPA’s $7.5 billion of debt via the newly created Utility Debt Securitization Authority was expanded this year to grow to $4.5 billion. And this new debt is to be paid off by the monthly service charge on residential ratepayers’ bills that was originally fixed at $10 and is now to be increased to $20.
The governor’s pronouncement that the 2013 legislation that authorized “LIPA to refinance a significant portion of its debt in a manner that would provide much needed relief to taxpayers in the service area” was delusional. The proof: PSEG and LIPA have proposed annual rate increases—not fuel-related increases—between 3-3.4 percent over the next three years.