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After Isaias failures, LIPA renews a contract with PSEG Long Island

Gustav Holmström

The Long Island Power Authority has reached a new agreement on a four-year contract with its service provider, PSEG Long Island. It also settles a $70 million lawsuit LIPA filed against PSEG-LI following Tropical Storm Isaias in August 2020.

“It is a very strong contract that will meaningfully address the challenges that we encountered in Tropical Storm Isaias,” LIPA chief executive Tom Falcone said. “The contract ensures local Long Island management that it is directly responsible for operating the electric grid, and it will pave the way for record investments and customer service and reliability, resiliency and clean energy.”

PSEG Long Island, whose parent company is in New Jersey, already manages thousands of power lines, dozens of substations and four control centers in the region.

Nearly 400,000 customers lost their power for a week after Isaias and restoration of power was delayed due to poor management and performance. The blunder opened 15 months of investigations into the utility company for its failures. LIPA considered replacing its PSEG contract with another service provider or changing to a public utility model.

Since then, PSEG-LI took on over 100 recommended changes, including upgrading its outdated storm communication system.

“PSEG has a binding commitment to deliver us the infrastructure that's required, including storm-hardened and tested IT systems,” Falcone said, “and LIPA is taking on the obligation to independently verify and validate that these are done correctly.”

Under the new contract, PSEG-LI will provide $30 million in benefits to customers who covered costs to repair and upgrade the utility’s information systems. It also includes more penalties and new strict requirements for long-term oversight of planning, budgeting and management. Falcone said LIPA has the ability to terminate the contract early, and withhold half of PSEG-LI’s $80 million management fee each year as punishment.

“We are eager to bring this collaborative agreement to closure following review by the state of New York. We are proud of our employees, their achievements and the strategic improvements we have made since 2014 and this agreement reflects that legacy of performance,” said Daniel Eichhorn, PSEG-LI president and chief operating officer.

A public hearing on the new agreement will be held on December 2. The LIPA Board of Trustees will meet next week on November 17 and is expected to reach a decision before the end of the year. The last board meeting is on December 15. Board members have said they are “cautiously optimistic” about continuing their relationship with PSEG-LI.

Still, state lawmakers from Long Island are drafting a bill that would eventually allow LIPA to turn to a public model and operate the region’s electric grid and energy distribution. It follows efforts by Reimagine LIPA, a 30-member coalition that has advocated over the last year to end the regional energy industry’s public-private model.

“It’s no surprise there are members of the board who continue to ignore ratepayers, who pay exorbitant electric bills for unreliable service. We hope the board will come to its senses and reject this deal in favor of full municipalization, and we urge all residents who are fed up with LIPA and PSEG to take advantage of the public comment period to demand public power,” said Danny Hopkins, spokesperson for Reimagine LIPA.

Falcone said the deal also still needs approval from the state Attorney General and Comptroller’s offices.

A native Long Islander, J.D. is WSHU's managing editor. He also hosts the climate podcast Higher Ground. J.D. reports for public radio stations across the Northeast, is a journalism educator and proud SPJ member.