What Cuomo can do to Con Ed and LIPA for ‘lack of performance’

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Downed power line in Coney Island. (drpavloff via Flickr/)
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It's become something of a ritual for Governor Andrew Cuomo to blast Con Edison and the Long Island Power Authority for their performance following Hurricane Sandy.

On November 1, the governor sent a scathing letter to the chief executives of seven utilities, including Kevin Burke, the C.E.O. of Con Edison, and Michael Hervey, the C.O.O. of LIPA, whose board members are appointed by the state (including one by Governor Cuomo).

In the letter, Cuomo accused the utilities of failing to prepare for the storm, and of failing to "keep the trust that New Yorkers have placed in you by granting you the privilege to conduct utility business in New York State."

"In the context of the ongoing emergency, such a failure constitutes a breach of the public trust," he wrote. "Under such circumstances, I would direct the Public Service Commission to commence a proceeding to revoke your Certificates."

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Earlier this week, he took up the cudgel again, and said the utilities "will be held accountable for their lack of performance."

As of Monday, 1.35 million households still had no power in the regions hit by Hurricane Sandy.

Yesterday, Mayor Michael Bloomberg said that in New York City, 91,000 homes still have no power.

Assuming this is more than mere bluster, here's what Cuomo's accountability might look like:

The Public Service Law gives the state's Public Service Commission the right to investigate and regulate the utilities, while the State Administrative Procedures Act allows the state to revoke a utility's operating certificate.

According to the governor's office, first, Cuomo could launch an investigative process, which would be overseen by an administrative law judge.

During that process, the utilities would present their cases, as would the governor and the stakeholders.

The investigation would seek to answer a couple of key questions: Were the utilities adequately prepared for the storm? And did they take responsibility for the repair work following the storm, or did they pass the expense and responsibility on to their customers instead?

The judge would then present a recommendation to the Public Service Commission.

Five people sit on its board, each appointed by a governor to six-year terms. Only one was appointed by Cuomo.

It is the PSC that would make the ultimate determination.

The PSC could decide to fine the utilities, or—and this would be drastic—decertify them. Which is exactly what the governor is threatening to do.

(In order for this process to apply to LIPA, the governor would have to pass legislation amending the state statutes governing LIPA and the PSC, according to Jackson Morris, director of strategic engagement at the Pace Energy and Climate Center.)

There does appear to be some historical precedent for this.

In the 1980s, when Cuomo's father Mario was governor, the state created the Long Island Power Authority.

The idea was to have LIPA take over the assets of the Long Island Lighting Company and decommission its Shoreham nuclear power plant, according to The Encyclopedia of New York State

LILCO had overseen the plant's construction, and Long Islanders blamed the related (and enormous) cost overruns with creating the highest utility rates in the nation. 

LIPA ultimately succeeded in taking over LILCO's electric transmisson system in the late 1990s.

(The company now known as KeySpan Long Island acquired its power plants and natural gas system.)

LIPA, it should be noted, is run by the state, and its board members are appointed by the governor.

So if Cuomo did follow through on his threats, he'd do so by convincing one state-controlled agency, the PSC, to decertify another, and to create a framework for replacing it.

There's no way of knowing absolutely whether the replacement entity would constitute an improvement. The LILCO-LIPA precendent suggests that the answer is: Yes, at least for a while.