In its letter to Governor Cuomo, the members of the Moreland Commission included this statement:
“The Final Report continues the investigation of the Long Island Power Authority (LIPA) by picking up on the investigation initiated by the Office of the New York State Inspector General (IG), ordered by you in April 2011, which uncovered issues not previously reviewed. The new issues identified appear to be only a sampling of LIPA’s structural dysfunction and blatant disrespect for ratepayers. Furthermore, the Commission believes that some of the issues warrant further investigation by a prosecutor. Ultimately, the Commission concludes that LIPA’s bifurcated management structure fails to work not only during weather emergencies, but also during “blue sky” conditions, reinforcing the Commission’s initial conclusion that LIPA, in its current state, should no longer exist.”
The report hones in on LIPA’s relationship with the consultant firm Navigant. This relationship is a “revolving door” for management for both LIPA and Navigant. Former LIPA CEO Michael D. Hervey left LIPA after Superstorm Sandy and almost immediately became an employee of Navigant. Between 2008 and 2011 LIPA customers paid $65 million to consultants of which $28 million went to Navigant. According to the Commission, consultant bills were seldom scrutinized, resulting in payments to Navigant consultants being reimbursed for expenses including travel, hotel, food, and even an out of state engineering license, that were well beyond acceptable established standards.
Page 17 of the report addresses concerns the Commission has with Navigant billable hours and lack of oversight. Navigant has between 52 and 64 consultants working with LIPA, mostly senior in rank, and billing between $300 - $500 per hour exclusive of expenses. Some of these consultants have 1,800 billable hours a year. According to the report between 2008 - 2012 “Robert Kendall, Managing Director, who maintains residences in California and Utah, was Navigant’s top billing consultant to LIPA and alone billed LIPA over $4.5 million. During this time, Kendall often billed well over 2,000 hours a year and in 2008 billed almost 3,500 hours. These hourly charges were approved and paid despite internal questions regarding their propriety.”
The Commission did convey the importance of taking steps to prepare for the next weather related emergency, but those recomendations were overshadowed by the very negative information about LIPA’s management.
To read the Moreland Commission report click here.