The Moreland Commission (Moreland Commission on Utility Storm Preparation and Response) has recommended that the Long Island Power Authority (LIPA) should be dissolved. LIPA is a state agency that was created in 1985 to manage Long Island’s power grid. The commission recommended that the network that supplies electricity to 1.1 million customers should be turned over to a utility company overseen by the same state commission that regulates Consolidated Edison and other power distributors in New York.
But that regulator, the Public Service Commission, needs more resources and the power to punish utility companies with heavy fines and even the loss of their franchises, the commission said. Those recommendations were part of a preliminary report presented to the governor in advance of his annual State of the State speech. The major changes proposed by the commission would require legislation.
After storms in 2011 and again after Hurricane Sandy cut power to 90 percent of Long Island Power Authority customers, that longstanding arrangement drew criticism from officials, including Mr. Cuomo. They blamed it for the authority’s disorganized response, which left most customers without power for more than a week in November, and some for over two weeks.
To improve the way utilities prepare for and respond to storms like Hurricane Sandy, the governor said, state regulators need a better set of potential incentives and sanctions. Most of all, he said, they need the ability to brandish the threat of withdrawing a utility’s certificate to operate.
Placing the power grid in private hands would be the most cost-effective option and would put its operation under the scrutiny of state regulators, the Moreland Commission concluded. It would then operate as other big utilities like Con Edison do, rather than in the bifurcated way it has for more than three decades.
The power authority, which has just 112 employees, does not actually operate the system for distributing electricity on Long Island. It merely owns the grid, and oversees the work of a utility company — National Grid, which is in the final year of its contract — that it pays to keep the power flowing.
The unusual arrangement goes largely unnoticed until a storm blows in and knocks out power to large swaths of the island. Then, attention turns to the authority’s executives and the board of political appointees they answer to.
The commission said the regulatory agency needed a larger staff and should have more engineers and auditors to monitor utilities effectively, but it provided no estimate of how much that expansion would cost.
A more complicated financial issue is the question of how to make the Long Island grid attractive to a private buyer. The authority is saddled with about $7 billion in debt it took on to build the Shoreham nuclear plant, which was shuttered before it ever operated commercially. The authority has assets worth about $4 billion, which would leave it with about $3 billion of “stranded debt.” Another obstacle to privatization cited by some industry experts would be the loss of the ability to issue tax-exempt debt, which would increase the costs of paying to run the utility. (NYTimes, 1/7/2012)