The Long Island Power Authority (LIPA) Board of Trustees on Sept. 25 approved an amendment to its Operations Services Agreement with PSEG Long Island, extending the partnership for five years beginning on January 1, 2026.
The extension strengthens affordability for ratepayers, enhances accountability, and ensures a competitive procurement process beginning in 2028, LIPA noted.
The new agreement reduces costs, tightens budget controls, increases PSEG Long Island’s liability cap for certain events, enhances LIPA’s oversight of storm preparedness and technical standards, and maintains rigorous performance metrics. Together, these provisions ensure that customers benefit from stronger performance while saving customers an estimated $17 million in management fees over the existing contract, LIPA noted.
Tracey Edwards, Chair of the LIPA Board of Trustees, said, “At a time when utility rates are rising nationwide, LIPA remains focused on keeping costs affordable while holding our service provider accountable for results. This contract extension locks in a flat 2026 budget, delivers an unprecedented reduction in management fees, and strengthens budget oversight. I appreciate PSEG Long Island’s partnership in securing an agreement that puts our ratepayers first.”
Carrie Meek Gallagher, Chief Executive Officer of LIPA, said, “Our goal is to protect customers and prepare for the future, and that’s what this agreement is about. By requiring flat budgets, increasing financial accountability, and strengthening LIPA’s role in setting technical standards, we are ensuring affordability today and preserving our assets for tomorrow. This is another step in delivering on our mission of reliable, affordable, and clean energy for all customers.”
Valerie Anderson Campbell, Vice Chair of the LIPA Board of Trustees, said, “This agreement puts our customers first. It lowers costs, strengthens accountability, and ensures that PSEG Long Island is held to high standards every year of the contract. The Board and staff worked tirelessly to deliver a better agreement than the one last approved in 2022. The result is clear: customers will see real savings and stronger oversight.”
The amended contract delivers meaningful benefits for LIPA customers by lowering costs, holding PSEG Long Island accountable to strong performance, and strengthening reliability and oversight.
Highlights of the agreement include:
- $17 Million in Customer Savings: Reduced management services fee under the extension, compared to continuing the current contract.
- Accountability Through At-Risk Fees: Preserves the fixed, variable, and Department of Public Service (DPS) pool structure – keeping a significant share of PSEG’s Long Island’s compensation tied to results.
- High Standards Maintained: Guarantees that performance metrics remain no less challenging than today, incentivizing strong performance.
- Flat 2026 Budget: Holds the upcoming 2026 budget at 2025 levels, with only very limited exceptions. PSEG Long Island must also provide analysis to keep future budgets flat year-over-year, at LIPA’s request.
- Stronger Cost Controls: Imposes new restrictions on shifting funds across budget categories or increasing performance metric funding without LIPA’s approval.
- Greater Oversight and Transparency: Requires monthly variance meetings with LIPA, which ensures cost discipline and accountability to customers.
- FEMA Reimbursement Reforms: Clarifies requirements to avoid costly disputes and reduce the need for outside consultants – directly benefiting ratepayers.
- Enhanced Storm Response: Raises the threshold for declaring storm events to protect customers from unnecessary charges and provides a path for guaranteed resource contracts for high-voltage personnel, subject to LIPA’s approval.
- Customer Protections Strengthened: Increases PSEG Long Island’s annual liability cap for certain events from $40 million to $55 million, providing greater safeguards for customers.
- Improved Operational Rights: Grants LIPA stronger authority to set technical standards, require grid modifications, and direct maintenance to protect assets beyond the contract term.
- Rigorous Performance Metrics: Confirms LIPA’s authority to set metrics, subject to DPS review, with at least 50% of variable compensation tied to quantitative results. A new joint committee will use industry benchmarking and Environmental, Social and Governance (ESG) standards, in addition to PSEG Long Island’s historical performance, to set forward-looking targets.
- Customer Satisfaction Reset: Resets customer satisfaction metrics beginning in 2026 to ensure a fair and accurate baseline.
- Preserves 2022 Contract Reforms: Maintains all key customer protections secured in the 2022 contract.
“PSEG is proud to maintain its successful partnership with LIPA for the next five years and continue to improve electric service on Long Island and in the Rockaways,” Ralph LaRossa, board chair, president and CEO of PSEG, said. “Since 2014, PSEG Long Island has become the No. 1 overhead electric service provider in the State of New York in reliability and customer satisfaction.”
