The bond rating firm Fitch has skepticism on the Long Island Power Authority turning itself into a fully public utility.
Analysts have a largely positive outlook for LIPA, giving it an “A”, which is two ranks below its highest rating. Fitch noted LIPA's reasonable success in lowering operating costs, which are still comparatively high.
However, the firm also said it’s unlikely to improve LIPA’s credit rating until a final decision is made about its future with public-private partnerships.
Right now, it's a public authority which contracts utility operations to the for-profit company PSEG Long Island. This contract is up for renewal in two years. State lawmakers are forming a commission with the aim of transitioning LIPA into a stand-alone utility with direct control over operations.
Refusing to upgrade LIPA’s bond rating because of this potential switch increases LIPA’s borrowing cost, which in turn raises electric rates. At the same time Fitch expressed skepticism about a fully public LIPA, it also noted that a renegotiated contract with PSEG Long Island gave LIPA leverage to cut costs and improve storm recovery.
