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NY Gov. Cuomo Proposes Legislation for LIPA Takeover by PSE&G

May 16, 2013

New York Governor Andrew Cuomo unveiled earlier this week a detailed proposal outlining how the Long Island Power Authority (LIPA) will be restructured in order to stabilize electricity rates, reduce LIPA’s debt, and provide better overall service for the utility’s customers.

In Gov. Cuomo’s press release: “Under the old structure with LIPA in charge of operations, decisions on resource/capital investment were made using consultants and not utility managers actually running the system, often putting political priorities ahead of the needs of ratepayers. Additionally, since it was established, LIPA has not been subject to any State oversight with no accountability for performance.”

In the legislation, Gov. Cuomo proposed that the bulk of LIPA’s operations will be taken over by New Jersey-based Public Service Electric & Gas (PSE&G). While there are several details that may be negotiated, the takeover is predicted as inevitable. LIPA currently employees 90 staff members, and this number will be cut to 20, if the legislation is passed. Board members will be reduced from 15 to 5. PSE&G will take over daily operations including operations, budgeting, maintenance, storm preparedness, infrastructure improvements, energy efficiency, and renewable energy initiatives. Half of LIPA’s $6.7 billion debt will be refinanced at lower rates.

The good news for LIPA’s ratepayers is that electricity rates are scheduled to freeze for the next three years under PSE&G, if the legislation is passed. Customers can also expect improved reliability and service, including less power outages, faster response times to restoring power, and better customer service.

During the aftermath of 2012’s Superstorm Sandy, 90 percent of LIPA’s 1.1 million customers in Long Island were left without power. Many customers didn’t have power for more than two weeks. LIPA’s customer satisfaction ranking, as surveyed by the American Customer Satisfaction Index (ACSI), dropped 26 percentage points following the storm. Currently, the rank is at 43 percent, the lowest of all utilities recorded by the ACSI.

The aftermath of the storm forced the state of New York and the state’s utility regulatory authority, the NY Public Service Commission to closely scrutinize LIPA’s operations, level of service, and debt. It is unclear when the legislation will go up for approval into law.