In 2022, the state Legislature created a commission that was wired to recommend in 2023 that the municipalization of the management of the Long Island Power Authority’s electrical grid “represents the best alternative for LIPA ratepayers.”
That recommendation, in my judgment, is ludicrous.
But before explaining my opposition, recounting LIPA’s history in a nutshell is necessary.
For over half a century, the generation, distribution and maintenance of electrical power on Long Island has been a hot potato tossed around by governors, county executives and local pols fearful of being held accountable for outlandishly high electric rates and blackouts.
In the early 1970s, politicians panicked when the Middle East embargo pushed the price per barrel of oil to over $60, causing significantly higher local electrical charges.
Fearful of voter backlash, they supported the Long Island Lighting Company’s plan to build a nuclear plant that they were certain would provide an unlimited supply of cheap power.
Construction of LILCO’s Shoreham nuclear facility began in 1973 and was nearing completion by 1984. In May 1988, however, with changes in the political climate—and with memories of gas lines fading—federal and state officials blocked Shoreham from opening. The environmental lobby was appeased, but LILCO was destroyed financially.
To deal with the disaster, a 2023 Empire Center report noted “LIPA was first established to buy out the ill-fated Shoreham nuclear plant … and eventually bought out LILCO completely…. The multibillion-dollar debt from the never opened Shoreham (roughly $13 billion adjusted for inflation), plus additional debt taken on since, has caused Long Islanders to pay electricity prices above both the state and national averages.”
As a New York State public benefit corporation, LIPA was intended to be nothing more than a holding company with no more than 15 staffers to oversee financing and debt management. The actual maintenance, generation, transmission and distribution work was to be handled first by KeySpan, then National Grid and later PSEG. Instead, LIPA ballooned to over 100 employees as the authority became a dumping ground for the relatives of politically connected seeking high-paying employment.
Because LIPA squandered hundreds of millions of new debt on consultants, on failed fuel cells, electric buses, solar panels, and costly research and development programs that yielded little investments in nuts and bolts, infrastructure suffered. The effects of this neglect became evident during 2011’s Hurricane Irene and 2012’s Hurricane Sandy.
Reacting to the Hurricane Sandy disaster, an angry Gov. Andrew Cuomo responded by pushing through the Legislature the LIPA Reform Act and directed LIPA to replace National Grid with PSEG.
As a third-party manager, PSEG has been far from perfect, but it has been more than adequate.
So why municipalize its services?
The Empire Center has concluded it does not make any sense: “A fully municipalized LIPA can’t do it any cheaper….Capital costs won’t be any lower…It is also already able to access Federal Emergency Management Agency funds for repair of storm damage that is not available to private utilities….It’s hard to discern what’s the real point of the municipalization proposal.”
There are other practical reasons for opposing a takeover. First and foremost, the day-to-day oversight management of Long Island’s entire electrical power system would be overseen by a board consisting of political cronies who can turn it into a political patronage mill.
A politically driven board would have trouble attracting qualified highly paid employees, particularly a CEO to replace the well-respected Tom Falcone who, unfortunately, resigned in March.
And what about the hundreds of PSEG employees who perform the day-to-day management and upkeep of the electrical infrastructure? Will they become LIPA employees eligible for lucrative state pensions?
The cost to ratepayers to fund the pensions would be exorbitant and would increase the already sky-high usage costs.
And then there is the question of responsibility. If PSEG is no longer responsible for managing, then it cannot be blamed for blackouts or failed emergency responses. Instead, the blame would fall on—you guessed it—Gov. Hochul, who controls LIPA.
No, the municipalizing of the electrical system makes no sense practically or politically.
The good news: Albany insiders tell me Gov. Hochul has realized there is no political upside for her and has quietly put the kibosh on the LIPA enabling legislation.
Hopefully, she stands by her decision.
