Who wouldn’t want to fix LIPA?
Now, finally, Governor Andrew Cuomo wants to remake the Long Island Power Authority, turning it into an efficient, well-run power company that is able to protect its grid from future Hurricane Sandy-like storm surges.
Which sounds great. But to do so, Cuomo may have to overcome some serious institutional resistance.
That LIPA needs fixing is beyond dispute, particularly after its poor response to the devastation wrought by Hurricane Sandy. Cuomo was a particularly strident critic, calling it a "nameless, faceless bureaucracy," and advocating the removal of its management, all the while avoiding calling attention to his own role, as governor, in overseeing the public authority.
Now, as public awareness of the governor's responsibility for LIPA has grown, he's taking action to reform it, or at least to diagnose it and come up with a course of action.
What won't become clear until later, when the investigating is over and it's time to act, is whether the officials with a vested interest in the current structure of LIPA intend to cooperate, particularly the Long Island-led Republican conference in the State Senate.
(A spokesperson for the Senate Republicans did not respond to a request for comment.)
The Long Island Power Authority is, like the Metropolitan Transportation or Thruway Authority, a creature of the state. The governor appoints most of its trustees, and in order to abolish it, or change its structure, state legislative approval is required.
Also, unlike some other state agencies, the authority is a contractually obligated to pay property taxes and payments in lieu of taxes on its contractor National Grid's power plants, which are spread out over a number of municipalities, according to Michael Fragin, who served on the authority's board of trustees' finance committee through 2011.
“It’s a huge political football, because the Port Jefferson power plant pays half the taxes of the Port Jefferson school district,” he told me.
Or, as Manhattan Insitute Nicole Gelinas put it, LIPA is "basically funding Long Island’s overspending."
The question, then, is whether Long Island-based legislators will want to change LIPA if it means making that tax revenue go away.
And then there's the question of LIPA's debt, which is sizable (nearly $7 billion), and which will become the concern of legislators all over the state if a planned LIPA reform requires addressing it.
At the moment, according to Fragin, "30 to 35 cents on every [ratepayer's] dollar goes to pay debt and taxes."
"The debt burden is a huge factor in any decision that LIPA makes," he said.
It would be a lot easier for LIPA, or whatever predecessor company takes shape, to invest in capital upgrades if it didn't have to service that debt.
A private bidder is unlikely to want to shoulder that burden.
But look at the alternative, which would be for the state to get involved.
That would probably sit well with LIPA ratepayers, and the politicians who represent them, but it's hard to imagine it would sit well with an assemblyman in Dutchess County or a senator in Saratoga.
"They can reorganize all they want, but they still have to have all this burden," said Gelinas.
"I’m sure Cuomo is not itching to take over whatever’s left," she continued. "But that's why people are paying high rates, and that could have been capital investment."