State offers Long Island Power Authority privatization as an option

The Moreland Commission, formed last November by New York Gov. Andrew Cuomo to look at the utility response to Hurricane Sandy, issued a Jan. 7 interim report that in part recommends possible privatization of the Long Island Power Authority.

Besides Sandy, the commission was also charged with looking at utility responses to Hurricane Irene, Tropical Storm Lee and a massive December 2008 ice storm, plus other major storms impacting the state.

“Due to the urgent need to address the dysfunctional delivery of power to the Long Island Power Authority (LIPA) service area and the serious shortcomings in the [New York State Public Service Commission’s] authority over electric utilities, the Commission determined it would be appropriate to issue this Interim Report,” said the report. “The findings and recommendations in the Interim Report are based on documents obtained from subpoenas issued to the utilities, testimony of those who operate critical infrastructure such as fuel and telecommunication providers, and data received through witness interviews, public hearings, media coverage and other publicly available materials. The Interim Report addresses certain issues which could be considered in the near-term.”

This Interim Report presents preliminary findings and recommendations for consideration regarding:

  • The “ineffective manner” in which LIPA addresses emergency planning, preparedness, and storm response in its service area;
  • The inherent defects in the current LIPA-National Grid structure that may be avoided in the future through an alternative organizational structure under which the service provider for the existing LIPA service area and the owner of applicable utility assets are one entity;
  • New oversight and enforcement mechanisms that should be considered to permit the PSC to make utilities more accountable and responsive to regulators and customers; and
  • How redundant and/or overlapping energy programs that usurp resources from core mission energy agency objectives could be better streamlined, allowing resources to flow back to agency core missions.

“The Interim Report provides sufficient evidence that LIPA’s outsourcing of most of the day-to-day management and operations of its system to National Grid simply does not work,” the report said. “In short, the bifurcated LIPA-National Grid structure lends itself to mismanagement, a lack of appropriate investment in infrastructure, a lack of accountability to customers and excessive rates. The Commission recommends immediate consideration of a single unified structure that both owns the transmission and distribution assets and is entirely responsible for serving LIPA’s current service area.”

The commission identified three options for consideration:

  • The disposition of LIPA’s assets to a qualified Investor Owned Utility (IOU) that would serve as the sole utility manager and operator to the existing LIPA service area. This privatization would place the new service provider under the stronger regulatory environment recommended by the PSC, as opposed to remaining a self-regulated entity.
  • Full public ownership and operation by LIPA of the transmission and distribution system. This “public power” model would integrate all vital functions into one entity.
  • Full public ownership and operation by the New York Power Authority of the LIPA electric system. In this alternative, which would keep the LIPA assets in the public power arena, NYPA would assume direct responsibility for management and operation of LIPA’s transmission and distribution system, with LIPA maintained as a separate subsidiary within NYPA.

In May 1998, LIPA became Long Island’s primary electric service provider. Besides transmission, the authority is also involved in power generation, including solar power.

The LIPA Board of Trustees voted Oct. 25, 2012, to authorize staff to begin negotiating potential power purchase agreements (PPA) for new generating resources consistent with LIPA’s Electric Resource Energy Plan. The trustees also authorized actions related to diversifying LIPA’s resource portfolio, including efforts and investments to improve energy efficiency through the Efficiency Long Island Program, its renewable energy programs, future renewables procurements, and other actions and investments targeting up to a minimum of an additional 400 MW by 2018 resulting in a total of over 700 MW installed.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.