The following appears in the September 9-15, 2011 issue of the Long Island Business News:

Now that Hurricane Irene is over and electric service has been restored to the Island, it is time for a sober review of the performance of those who run our electric system.

In the mid-1990s, I served on a review group for the Long Island Power Authority’s future, appointed as a conservative member of that team. I remember the commitment that LIPA would have no more than two dozen employees and would oversee a private sector utility hired to operate and maintain the electric system. All agreed that LIPA didn’t have the expertise, experience or background to provide electricity to 3 million people.

That approach was reflected in LIPA’s acquisition of LILCO’s transmission and distribution businesses back in 1998. LIPA’s role was merely to serve as a financing conduit that issued billions of dollars in tax-exempt debt to refinance the billions in Shoreham debt LILCO had fruitlessly incurred. Further, as a public entity, LIPA would not have to pay federal or state income taxes or provide returns to the stockholders of a privately owned company. Those three sources permitted a 20 percent rate cut. Ratepayers cheered.

But a now-forgotten, long-time LIPA official began a campaign to position LIPA as the actual provider of electric service on Long Island. LIPA’s profile was raised as the place to look for storm restoration, maintenance matters and all the small and large tasks incident to providing power in a post-industrial society. When storms threatened, it was LIPA that held the prime spot at press conferences and the public concluded, incorrectly, that LIPA ran the electric system on Long Island.

During LIPA’s 13-year existence, Long Island was fortunate and missed the horrors of a full-scale hurricane, last seen in 1985 when Hurricane Gloria knocked out the power of 750,000 Long Island electric customers. On Aug. 28, Long Island’s lucky streak ended. Irene struck, casting over 500,000 customers into darkness. Thankfully, no life was lost and injuries were few.

The inevitable public outrage arose slowly at first and then loudly against LIPA for not restoring power quickly. (Gov. Andrew Cuomo’s strong intervention as recovery lagged undoubtedly played a role in bringing Irene’s impact to an end,) Throughout the entire crisis, one thing was certain: LIPA’s communication with its customers was horrid. Tens of thousands of calls were dropped, customers who got through were told nothing about crew assignments and when power would be restored. Even LIPA’s COO conceded that customer communication was poor.

But in fact, Long Island electric consumers may be directing their ire at the wrong place. That’s because LIPA’s 100-plus employees include zero electric linemen and zero tree trimmers and zero substation operators. LIPA’s employees – accountants, lawyers and the politically connected – only monitor the company that actually runs the electric system on the Island. That company is National Grid, an international energy company based in London with significant operations in New York and Massachusetts. Grid is the successor to Keyspan, which acquired LILCO’s generation and gas businesses in 1998. I will leave it to post-mortem reviewers to determine whether Grid was up to the job of restoring power. My sense is that International Brotherhood of Electrical Workers employees workers from National Grid and states as far away as Michigan, Missouri and Tennessee worked long and hard to restore power and deserve our thanks.

Just as the Federal Emergency Management Agency was roundly criticized following Hurricane Katrina for its inadequate response caused in part by being perceived as a first responder rather than a federal coordinating bureaucracy, so, too, LIPA’s past communications have misled the public and have confused responsibility for restoration of service. It’s high time for LIPA to clarify what it is and isn’t, and who actually bears responsibility for electric service on our Island.

Statement by

George J. Marlin

Director

Nassau Interim Finance Authority

 September 2, 2011

It is essential for Nassau taxpayers to understand that the County’s initiative to privatize the waste water system is not a slam-dunk.  There is no guarantee that a transaction can or will be finalized in 2012 or anytime thereafter or that the County will net the $375 million presently included in their 3-year fiscal plan.  That is why I support the NIFA resolution calling for contingencies amounting to $150 million of revenues acceptable under applicable GAAP treatment in their 2012 plan.

Before any privatization transaction could be completed, a number of major issues must be addressed.  They include the following:

1)   The County must determine if the state legislature and the Governor must approve changes in Title 10-D of the New York Public Authorities law that created the Nassau County Sewer and Storm Water Finance Authority.  I specifically refer the County to Section 1232-d, Paragraph 10 of the enabling legislation.

2)    The County must determine if a wastewater privatization agreement requires the approval of the New York Public Service Commission.

3)   The County must determine if their expectation of netting $375 million from a privatization of the County’s wastewater system is achievable.  Proceeds from a transaction must first be applied to defeasing approximately $465 million of Authority and County bonded debt and interest payments to the first call date.  Only remaining proceeds, if any, could be transferred to the County’s operating fund.  

4)    The County must determine if the County Legislature is willing to approve a privatization agreement containing terms that convey to private sector operators the authority to impose, to set and, if necessary, to increase residential and commercial usage fees.  Presently, the County imposes on recipients of wastewater services assessment levies that are listed on the annual General Tax Bill.

5)    The County must determine if the County Legislature is willing to approve a privatization agreement which gives for-profit operators the right to reduce significantly, or to eliminate entirely, the number of union employees at waste water facilities.

6)    The County must determine if the County Legislature is willing to approve the use of any net revenues realized from a privatization transaction as a “one shot” to help balance the County’s operating budget.  “One shots” do not eliminate structural deficits and excessive reliance on them is frowned upon by rating agencies and financial analysts.

The issues I raise are important ones.  It is my hope that the County expeditiously addresses them.