The following appears in the June 7-13, 2013 issue of the Long Island Business News:

Since Gov. Andrew Cuomo unveiled his LIPA reorganization proposal last month there has been plenty of public weeping and gnashing of teeth, much of it justified.

The lowering of LIPA’s bond rating by Moody’s Investor Services to borderline junk, BAA1 from A3, did not help the governor’s cause. LIPA, Moody pointed out, has “little, if any, cushion for the unforeseen events that seem to occur every year.”

Political interference, Moody concluded, could make it “increasingly challenging for the board to take steps to systematically enhance the long-term financial and operational stability of the utilities, particularly if those actions would lead to rate increases.”

The feasibility of the governor’s pledge to freeze rates for three years has also been challenged.

The Director of Evercore Wealth Management’s municipal research department, Howard Cure, observed, “To start off with saying we’re not going to have any rate increases for three years when there’s a lot of capital needs – the math doesn’t work for me.”

The loudest complaints have been over the political decision to continue the $586 million in annual PILOT payments to local municipalities and school districts. Many commercial real estate proprietors and homeowners are tired of subsidizing municipal entities in which they do not own property or reside.

I, for instance, live in the New Hyde Park school district and paid about $9,000 in taxes this past school year. Because 15 percent of my monthly LIPA payments go to PILOTs, I also contribute year in and year out to the operating budgets of other school districts where LIPA owns land. That is truly “taxation without representation.”

Eliminating these egregious PILOTs could lower rates or at the very least freeze rates. Also, the revenues could be used to finance much needed capital improvements.

Another concern is the review and oversight of LIPA contracts over $50,000. Cuomo’s plan would amend Public Authority Law Section 1020-CC to eliminate the present requirement that “all contracts of the Authority shall be subject to the provisions of the state finance law relating to contracts made by the state.”

Such a change in the LIPA statute would cut the office of the State Comptroller out of the process to review and approve contracts. This in turn could open a new era in crony capitalism.

Finally, there is the issue of the proposed “advise and recommend” role of the Department of Public Service. Many are fearful that DPS will be a toothless tiger permitting the new five-member board to run wild.

The Cuomo administration has defended this structure, pointing out that LIPA bond covenants prohibit direct DPS control over rates and management.

This claim is substantially true. The rating agencies prefer public utilities to be free from crawling through state bureaucratic mazes to get approval for rate increases in order to meet principal and interest payments on outstanding debt.

Nevertheless, the DPS will not be opening an office in Long Island merely to take in the sights. Hovering over the LIPA board, scrutinizing budgets and capital project plans, utilizing the bully pulpit and issuing critical public edicts of board practices or policies, will most likely keep the trustees on the path of righteousness.

The clock is ticking. The governor has only a month to get a LIPA reorganization plan through the state Legislature and hurricane season is rapidly approaching. This may mean Cuomo will have to put aside his pride and address some of the issues raised here and by other critics.

If Cuomo fails and Long Island gets hit with another Sandy debacle, he will not be able to evade responsibility for the miserable response of one of his state agencies as he did last year. The finger he will be able to point will only be at himself.

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.

This article I wrote appears in the New York Post on May 20, 2013.