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New York commission recommends beefing up PSC, privatizing LIPA


From the January 9, 2013 issue of Public Power Daily

Originally published January 9, 2013

By Robert Varela
Editorial Director
A state commission examining New York utilities’ response to Hurricane Sandy and other major storms issued a preliminary report Jan. 7 recommending greater authority for the Public Service Commission and privatization or restructuring of the Long Island Power Authority. The Moreland Commission on Utility Storm Preparation and Response recommended "that statutory and other actions be made to put real regulatory and enforcement teeth into the PSC, which for far too long has been a toothless tiger."

The report’s specific recommendations for the PSC include that it:
  • be given clear authority to revoke a utility’s operating certificate.
  • be statutorily authorized to fine utilities for violations of PSC orders and regulations or upon a finding that a utility has failed to provide safe and adequate service under a "reasonable business" standard. The size of the potential penalties should be increased from a maximum of $100,000 a day to 0.2 percent of a company’s gross income (which could amount to $750,000 a day for LIPA), the commission said.
  • recommence operational audits at least every five years.
  • be authorized to order a utility to comply with recommendations in PSC management and operations audits.
Consideration should be given "to requiring senior officers of each utility to annually certify to the PSC that the utility is acting in compliance with all applicable state laws, rules, regulations, orders, and procedures, including the statutory requirement to provide safe and adequate service," the commission said. 

LIPA’s outsourcing of most of the day-to-day management and operations of its system to National Grid "simply does not work," the interim report said. The commission recommended "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 report discussed three options: sale of LIPA’s assets to an investor-owned utility; full public ownership and operation by LIPA of the transmission and distribution system; and full public ownership and operation by the New York Power Authority of the LIPA electric system. 

While recommending privatization, the commission acknowledged that all three options "have their own benefits and risks that must be balanced against the best interest of the ratepayers in the existing LIPA service area." LIPA is "reviewing the report and will continue to cooperate with the state and the Moreland Commission to do what is in the best interest of Long Island’s ratepayers," the utility told The New York Times.

The commission anticipates issuing its final report by spring 2013.

LIPA is an agency of New York state. It began serving electricity customers on Long Island in 1998, after the Long Island Lighting Co. incurred billions of dollars in debt to build the Shoreham nuclear plant. The plant was built to completion, but never operated because of public concerns about safe evacuation of Long Island if an accident occurred at the plant.

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