Understanding the recent turmoil at LIPA

The Long Island Power Authority has been in turmoil in recent months. 

LIPA was created by the New York State Legislature three decades ago following a grassroots effort led by Murray Barbash and Irving Like to establish a public power entity on Long Island to replace the private Long Island Lighting Company. They headed a group called Citizens to Replace LILCO.

A model was a public power entity in California, the Sacramento Municipal Utility District, SMUD.

SMUD was set up—and continues today—as a democratically based public utility. It has a seven-member board of directors elected from the 1.5 million people in SMUD’s 900 square mile service area. SMUD itself runs its power grid. 

A key reason for the formation of LIPA was LILCO having been embarked on a scheme to build seven to eleven nuclear power plants in Suffolk County. The first plant constructed was at Shoreham. It underwent a series of problem-plagued low-power testing. Meanwhile, the drive for public power—based on a democratic structure like SMUD’s—was culminating with the creation of LIPA. 

LIPA’s parallel with SMUD is striking in terms of nuclear energy.

In the SMUD service area there was also a problem-plagued nuclear power plant, Rancho Seco. The U.S. Nuclear Regulatory commission found it to have design flaws and other problems including leaks from its cooling system and a fire.

By an overwhelming vote of SMUD customers, Rancho Seco was shut down. 

The creation of LIPA ended LILCO’s nuclear push. Central to this was LIPA, as a governmental entity, having the power of condemnation. If LILCO persisted with Shoreham and the other nuclear plants it sought, LIPA was prepared to eliminate it as a corporate entity.

So LILCO gave up Shoreham, turned it over to LIPA for $1 for decommissioning as a nuclear facility, and LIPA was formed with a focus on providing green energy.

(I wrote a book on all this, “Power Crazy,” published by Grove Press.)

Later, LILCO dissolved.

However, once LIPA began, its democratic basis was eliminated by Gov. Mario Cuomo and that was formalized by his successor, George Pataki. Instead of its trustees being elected, they arranged to have them appointed by the governor and leaders of the State Assembly and State Senate.

Moreover, instead of operating the Long Island power system itself, despite its name—Long Island Power Authority—LIPA contracted with a private utility to run its system.

First it was Keyspan and then in 2006 National Grid, when it acquired Keyspan. Then in 2012 National Grid’s contract with LIPA was not renewed after 90% of LIPA customers lost electricity when Superstorm Sandy hit. That prompted Gov. Andrew Cuomo (Mario’s son) to bring in Public Service Enterprise Group, based in Newark, New Jersey, to operate LIPA’s power system.

Considering LIPA’s legislative commitment to green energy, it is an unlikely combination. PSEG is a major operator of nuclear power plants in New Jersey and Pennsylvania. And in the 1970s, it actively pursued building a string of “floating” nuclear power plants in the Atlantic Ocean starting off New Jersey with the last just south of Long Island. I wrote about that then for the daily Long Island Press.

Further, as happened under National Grid, under PSEG many LIPA customers lost power for up to a week when Tropical Storm Isaias struck Long Island in 2020. This led to the formation of the New York State Commission on the Future of the Long Island Power Authority which held public hearings and conducted a study.

As the co-chair of this bipartisan commission, State Assemblyman Fred W. Thiele, Jr. of Sag Harbor, explained at one hearing: “When LIPA was created by the State Legislature back in the 1980s it had two purposes. One purpose was to close the Shoreham nuclear power plant which it did. The second purpose was to replace LILCO with a full public authority. That never happened.” LIPA “did replace” LILCO, but instead of operating the LIPA grid itself, it adopted a “third-party manager” to do that. “It’s the only third-party manager [utility] system in the country,” said Thiele. 

The commission concluded that LIPA should return to its original vision and itself run the power grid. It cited yearly savings in the millions and said that would “mitigate future rate increases” and result in an “upgrade of grid structure,” taking “climate-friendly green initiatives” and supporting “struggling residents and businesses.”

However, PSEG lobbied against the commission’s conclusion and it was not adopted. Thiele said of PSEG pressure: “If PSEG had actually been doing its job through the years, it would not need to spend millions of dollars on lobbying efforts to keep its contract.”

Recent months have been tumultuous. With PSEG’s contract to expire by the end of 2025, it faced competition from Texas-based Quanta Services. A LIPA selection committee recommended Quanta get the contract. It said Quanta offered “superior value, superior performance potential, and a stronger operational fit for Long Island’s needs.”

But six of the nine LIPA board trustees voted against the selection.

Former LIPA Trustee Drew Biondo criticized what he said was “a breathtaking disregard for the well-being of ratepayers, opting for the familiar stench of failure,” said Biondo, an assistant deputy commissioner for intergovernmental relations for the Suffolk County Police Department. “For a decade we have endured PSEG management, a tenure marked by questionable lobbying efforts against the very people they are supposed to serve, a disturbing history of misleading statements, and a consistent failure to deliver the reliable and affordable service we deserve,” Biondo said.

Part two tomorrow: Turmoil at the Long Island Power Authority continues.