SUFFOLK CLOSEUP : Behind Closed Doors LIPA And PSEG Reach Deal

SUFFOLK CLOSEUP

By Karl Grossman

The Long Island Power Authority (LIPA) and Public Service Enterprise Group (PSEG) quietly, behind closed doors and with the involvement of a top state energy official—the chief executive of the state’s Department of Public Service—agreed on a settlement last week allowing PSEG to continue to operate Long Island’s electric grid to 2025.

This happened despite a contingent of state lawmakers from Long Island signing a letter to Governor Andrew Cuomo calling on LIPA to “terminate its contract with PSEG LI as soon as possible and become a true public power company.” The 15 called on LIPA to operate the Long Island’s electric grid itself, not contract out the responsibility. They included State Senator Anthony H. Palumbo of New Suffolk and, from the Assembly, Fred W. Thiele, Jr of Sag Harbor; Steve Englebright of Setauket; Phil Ramos of Brentwood; Steve Stern of Dix Hills; and Kimberly Jean-Pierre of Wheatley Heights. “Across the country, publicly owned utilities have proven more affordable and reliable…are more responsive to customer needs,” they said. 

It happened despite a $70 million “breach-of-contract” lawsuit LIPA brought against PSEG in December charging the Newark, New Jersey-based private company with “grossly negligent performance” in dealing with Tropical Storm Isaias last year. Some 535,000 LIPA customers were left without electricity, some for more than a week. The LIPA suit accused PSEG of “corporate mismanagement, misfeasance, incompetence and indifference, rising well beyond the level of simple negligence.”

It happened despite the overwhelming percentage of people speaking at public hearings held recently by LIPA on its future testifying that that it should operate the Long Island electric grid itself and not continue with PSEG. “We need to revamp the entire structure,” said Laura McKellar of Greenlawn. Indeed, at that May hearing LIPA CEO Tom Falcone spoke of PSEG’s “sub-par” performance in Isaias and went on to say that that deeper “management failures” at PSEG had since been discovered. Mr. Falcone said: “It’s time for a course correction.”  

The new LIPA contract agreement with PSEG came about without transparency. As Mark Harrington wrote in Newsday last week, it was “reached early Sunday morning.” And, he reported, “The settlement terms were reached by officials at the highest levels of Gov. Andrew M. Cuomo’s Department of Public Service, including DPS chief executive John Howard.” 

 Mr. Howard was appointed to that post by Governor Cuomo in February and, at the same time, designated by the governor to be chair of the New York State Public Service Commission. Mr. Howard praised the new contract as an “historic agreement.”

Mr. Thiele is calling on LIPA’s trustees to reject the deal. A key problem, however, is that Governor Cuomo appoints five of LIPA’s nine trustees. Mr. Thiele emphasized how for months there has been analyses and hearings about the future of LIPA and it seemed “we were headed toward a favorable decision in regard to public power’—for LIPA to itself run the Long Island electric grid. “And then the governor injected himself and the process was short-circuited—and this contract falls out of the sky.”

“The legislature needs to get involved with this—how this deal came about,” declared Mr. Thiele. And he said he and Mr. Englebright, who is also chair of the Assembly’s Environmental Conservation Committee, are discussing, for starters, legislative hearings. 

“The agreement between LIPA and PSEG-LI reached behind closed doors this past Sunday marks still another betrayal of LIPA’s ratepayers,” he said in a written statement. The “original vision” for LIPA under the Long Island Power Act of 1985 was for “a full public power company accountable directly to the people of Long Island.” It “is clear that the third-party service contract model is a failure. It lacks oversight, transparency, and accountability. No other utility in the nation even has such a convoluted management structure.” 

In Newsday, Mr. Englebright, referring to the governor, spoke of “the apparent manipulation of this issue from an invisible puppet master.” Also, it was reported that the governor’s office didn’t “provide a comment to criticism of the deal.”

Organizations led by the Long Island Progressive Coalition, in the forefront in seeking that LIPA get rid of PSEG and becoming a full public utility, issued a statement declaring: “It seems that Gov. Andrew Cuomo has made a deliberate choice to ignore the stated preferences of Long Island ratepayers and elected officials, and instead decided to exert his influence in this moment on behalf of PSEG.”

Also, simultaneous with extending the PSEG contract, LIPA last week agreed to settle its $70 million breach-of-contract lawsuit against PSEG for $30 million.

Karl Grossman is a veteran investigative reporter and columnist, the winner of numerous awards for his work and a member of the L.I. Journalism Hall of Fame. He is a professor of journalism at SUNY/College at Old Westbury and the author of six books.