The Long Island Power Authority presented its renegotiated contract with PSEG Long Island at its board meeting this week. LIPA had considered replacing the electric utility after its poor performance following Tropical Storm Isaias last summer.
LIPA CEO Tom Falone said PSEG Long Island must meet new performance standards, or have their contract terminated and lose half of the $80 million it’s paid to run the regional electric grid.
“I hope, personally, that they meet every objective, they deliver on every objective and they make lots and lots of money because if they do that then they will have delivered real value for customers. But if not, that's why you always have to have options,” he said. “There has to be accountability, and I believe that this reform contract delivers the accountability that the board seeks.”
The new terms still need to be drafted into a contract with public input before it can be voted on by the LIPA board. It also must be approved by the state attorney general and comptroller for it to go into effect in January. The additional terms agreed upon include:
- Shortening the contract by eight years, from 2033 to 2025
- PSEG Long Island will forfeit $30 million to compensate customers, donate to charity and upgrade its communication system.
- LIPA will have the ability to terminate the contract after any emergency failure by the utility company. They can also be fired for reporting any inaccurate information to customers
- All Long Island utility employees will report to local management with the addition of five senior positions.
- The ability for LIPA to conduct stress tests on its systems, especially information technology, which malfunctioned during Isaias.
Peter Gollon, a LIPA board member, said maintaining a relationship with its current electricity service provider is the most efficient way to move forward.
“This is the safest and smoothest way of moving forward and rectifying the existing problems, and we still have the opportunity to municipalize if we can convince the Legislature or if somebody can convince the Legislature and the new governor to go forward,” he said.
Several lawmakers and community members want LIPA to reconsider its decision to contract the utility company and shift toward municipalization, or operate the region’s electrical system themselves. This would lower operational costs and reduce average customer's bill by 2%, Falone claimed.
Ryan Madden, a sustainability organizer with the Long Island Progressive Coalition, wants LIPA to municipalize. He said he is concerned the board has already made up their mind to move forward with the contract.
“I experienced a lot of leading questions kind of undermining the going down a different route,” he said. “It's concerning to hear that even without the full contract this kind of mindset is inevitable.”
Falone said LIPA would not be able to move forward with this option without state legislation authorizing them.
“That is, to some degree, a political interpretation,” Falone said.
He has spoken with state lawmakers about the possibility of creating a management company to operate the regional electric grid. Falcone claims that without the endorsement of the Legislature, he’d be “killed” politically.
“I don't think that that's the way public entities should go about their business,” he said.
LIPA would also have to pay a termination fee if they chose to municipalize.
