Gov. Cuomo signs bill to privatize LIPA

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N.Y. Gov. Andrew Cuomo has signed into law a bill to privatize utility operations of Long Island Power Authority. New Jersey-based Public Service Electric and Gas Co. (PSEG) will take over many of LIPA's responsibilities.

“LIPA has offered lackluster service for too long, and after its failure to perform during Superstorm Sandy it was clear we needed a change," Cuomo said in a release.

The legislation also seeks to establish a rate freeze lasting until 2015, according to the release. The LIPA’s debt has not decreased since the late 1990s and represents almost 10 percent of ratepayer’s bill, according to Cuomo’s office.

The legislation signed July 29 will refinance up to half of the $6.7 billion debt at a lower interest rate and establish a 2 percent property tax cap for the transmission and distribution system.

LIPA will become a holding company and will be staffed only at the levels necessary to ensure the authority is able to meet its core obligations. LIPA’s board will also be reduced to nine members. The changes maintains the utility’s eligibility for FEMA and tax benefits, but “offers the benefit of PSEG Long Island’s more efficient management structure as a private company,” Cuomo’s office stated in a release.

The new system will remain under public ownership with tax exempt financing for new capital investments. It will also face tougher state oversight under a new Long Island office of the Department of Public Service that will have the authority to review PSEG Long Island’s operations and issue recommendations to the LIPA Board for implementation.

Cuomo had established a commission to investigate LIPA after Superstorm Sandy, which concluded the “LIPA’s failures were the result of a dysfunctional bifurcated management structure that allowed poor customer service, high rates, lackluster storm preparations and inadequate infrastructure to persist without being addressed,” according to the release.

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POWERGRID International

July 2016
Volume 21, Issue 7