The Long Island Power Authority will explore replacements for its service contracts with PSEG Long Island over the next few months.
CEO Tom Falcone LIPA could still contract again with PSEG Long Island even after their poor performance following Tropical Storm Isaias last summer.
“We're continuing to negotiate and speak with PSEG,” Falcone said. “And there's a package of contractual reforms that we would look for from them that would provide our board and the public with some assurance that if we were to do this, again, give it a second chance that the performance would be better. We're also looking to see what other providers might be able to do.”
Falcone told LIPA board members this week that they will seek information from utility companies this summer while they continue to reform contracts with PSEG Long Island.
“There's an option there where you could work with PSEG, but you'd have to really turn over a new leaf, reset the contract and have something that you could take to the bank with written assurance that would lead you to believe performance is going to be better going forward, or you go with somebody else, or you manage it yourself,” he said.
Another option to privatize distribution was dropped because of increased costs for LIPA to manage the island’s power grid. They would have to pay $450 million in corporate income taxes, high financing costs, and dividends to shareholders each year. LIPA would also be out federal disaster recovery and storm hardening grants, which average about $160 million a year. That burden would be shifted to customers for an additional $32 a month.
Customers and lawmakers, who lashed out at PSEG Long Island’s poor performance, had hoped LIPA would make that decision this month.
“The updated options analysis released by the Long Island Power Authority today affirms the only choice is public power,” Ryan Madden, sustainability organizer at Long Island Progressive Coalition, said in a statement. “The LIPA Board must terminate its contract with PSEG, not solicit inquiry from other private providers, and instead commit to a new paradigm of energy management on Long Island.”
“Further delay is further time, money and resources wasted on a utility model that is structurally unreliable, unaccountable and more expensive,” he continued.
Instead, negotiations could take at least the rest of the year. Public hearings are slated for late May.
LIPA pays PSEG Long Island around $83 million a year to operate the system, and the utility company earns about another $10 million in incentive pay through the public-private partnership. A fully public LIPA could save ratepayers $800 million over a decade, Falcone said.
He said the public option would have LIPA manage power distribution themselves. He blames PSEG Long Island for slow restoration time and poor communication with customers after Isaias.
“You can't just look at what failed,” Falcone said. “You also have to look at ‘why did we pay all this money for management?’ And we not get what we were asking for.”
Legislation in the New York state Legislature would mandate adequate preparation for storms.
“Nine months after Tropical Storm Isaias, PSEG's systems are still failing, and LIPA — the purported oversight manager to PSEG — is nowhere to be found,” said state Senator Jim Gaughran, who sponsored the bill.
