The New York State Assembly’s energy committee held a hearing on Long Island this week to weigh the obstacles of Long Island Power Authority becoming a fully public electric system. But testimony revealed that New York Governor Andrew Cuomo demanded PSEG Long Island negotiate their contract with LIPA — or get out.
LIPA had spent months reconsidering its service contract with the utility after its poor response following Tropical Storm Isaias last summer.
“I think it was a moment for seriousness,” Tom Falone, LIPA’s chief executive, told the committee. “We had been negotiating with PSEG for about six months, and it was time to tell whether there was a deal to do with PSEG.”
Lawmakers said this agreement was done behind closed doors, and prevented discussions on switching to a public model, or contracting a different vendor.
“Despite the fact that we had this very good public process happening, the process itself was hijacked,” Suffolk County Legislator Bridget Fleming said. “My concern is that we are giving PSEG yet another bite at the apple and not holding them accountable."
Falcone said Cuomo’s intervention didn’t close the door to other options, including the municipalization of regional electric distribution — an option that has bipartisan popularity among state and local lawmakers. Instead, he said renewing the contract will prevent years of the gridlock involved with switching to a new vendor.
“It's a tremendous dislocation, to change out the IT systems, change the management team," he said. “That two-year process is not a time when you make gains. It's a time where you're just doing cleanup of IT systems, people communicating with customers. It's a distraction."
He said the new service contract would have teeth. If PSEG does not meet certain performance metrics, Falcone said it could lose the majority of its compensation or have its contract terminated. LIPA pays PSEG Long Island $80 million per year to manage the regional electric grid.
Falone said the delays with Isaias were largely caused by communication failures. The contract negotiations include provisions that could terminate the contract if the utility gives inaccurate information to customers. Under the contract, LIPA is also allowed to test the system.
“PSEG Long Island not only took full responsibility for these issues, but also has put considerable resources into ensuring that the communication failure is not repeated,” PSEG Long Island spokesperson Christopher Hahn said at the hearing.
LIPA also shortened the contract by eight years from 2033 to 2025. As part of the negotiations, PSEG will forfeit $30 million to compensate customers and upgrade its communication system.
Falcone said costs associated with different vendors would have largely remained the same, but switching to a public model could have a savings of up to $65 million per year, or 2% of the average customer’s electric bill. Switching to a municipal system would require state legislation.
“If the Legislature and the governor wish to go in that direction, it's certainly something we'll do,” Falcone said. “We're public servants. It's a legitimate option.”
State Assemblyman Fred Thiele of Sag Harbor said he will draft legislation next session.
“I would hope with the governor’s resignation, the LIPA Board, instead of rushing to judgment on a new contract, will look at the reports they themselves created,” he said, referring to Cuomo’s resignation on Tuesday over sexual misconduct.
The new contract could be released during the LIPA Board of Trustees meeting this week. If approved, it would go into effect in January. Falone said if the contract meets the requests suggested by the board, he expects the vote to happen.
Other concerns lawmakers have with PSEG Long Island include high rates paid by customers, and an alleged lack of renewable energy. However, LIPA has pledged to attain 100% renewable energy by 2040, reaching at least 70% by 2030.
