Division Between LIPA and NG Had Spawned Confusion Over Responsibilities, Lack Of Accountability, Misaligned Incentives
Tangled: Can Gov. Andrew Cuomo Fix the Long Island Power Authority?
Testimony of David Daly, PSEG Vice President-LIPA Transition Appearing Before a New York State Senate Joint Committee
VICE PRESIDENT-LIPA TRANSITION
PUBLIC SERVICE ENTERPRISE GROUP
PUBLIC HEARING ON
THE FUTURE OF LIPA
THE COMMITTEE ON INVESTIGATIONS AND GOVERNMENT OPERATIONS
THE COMMITTEE ON CORPORATIONS, AUTHORITIES, AND COMMISSIONS
NEW YORK STATE SENATE
FEBRUARY 27, 2013
Good Morning. My name is David Daly, Vice President – LIPA Transition for PSEG Long Island LLC, a Public Service Enterprise Group Incorporated (PSEG) company. I want to thank Chairs Marcellino and Ranzenhofer, and Committee members for the opportunity to appear before you this morning. I am the lead executive responsible for managing PSEG Long Island’s Transition and Operations Services Agreements with the Long Island Power Authority (LIPA). As you may be aware, PSEG Long Island is scheduled to assume management of LIPA’s electric transmission and distribution system on January 1, 2014. In the time allotted, I’d like to provide some background on my company our core competencies, and how we plan to deliver high levels of service and improve customer satisfaction for Long Island’s 1.1 million electric consumers.
PSEG is one of the nation’s largest energy companies and we’re also a neighbor. We own Public Service Electric and Gas Company (PSE&G), New Jersey’s oldest and largest electric and gas utility company. PSE&G serves 2.2 million electric customers and 1.8 million gas customers in a 2,600 square mile service territory similar to Long Island. We joined New York’s business community in 1999 when our electric generation business, PSEG Power, acquired the Albany Steam Station, an aging 450-megawatt electric generating plant located just south of Albany in Bethlehem, NY, and transformed the facility into the state-of-art BethlehemEnergyCenter. In the process, we doubled the site’s electric generating capacity while making dramatic reductions in air and water environmental impacts. We’d be happy to have you visit this facility here in the Capital District.
In total, PSEG has approximately $29 billion in assets and we employ almost 10,000 men and women. About two-thirds of our employees are represented by unions and we are proud of our strong relationships with the unions representing our employees. We own about 13,000 megawatts of generating capacity and we’re industry leaders in promoting and investing in energy efficiency and renewable energy.
What may be of particular importance to Long Island residents is that our work has gained considerable recognition by national, independent organizations for electric system reliability, storm response, and customer satisfaction. We’ve been cited as America’s most reliable electric utility five out of the last eight years and the most reliable in the Mid-Atlantic region for 11 consecutive years. The Edison Electric Institute, the industry’s national trade association, cited PSE&G for outstanding work restoring service after Hurricane Irene and Super Storm Sandy, and JD Power Associates recently ranked PSE&G second in the eastern U.S. region for residential customer satisfaction. It is this track record and the experience and expertise associated with it that we intend to bring to Long Island.
Most of PSEG’s assets and investments are focused in the Northeast and Mid-Atlantic. We consider New York part of our core market for business growth and investment and we viewed the opportunity to compete for the LIPA Operations Services Agreement in this context.
As you may know, LIPA selected PSEG Long island in December, 2011 after a two-year, competitive procurement process, to manage its electric transmission and distribution system and provide customer services, for a 10-year period beginning on Jan. 1, 2014. Both the Operations Services Agreement and the Transition Services Agreement have been approved by the New York State Attorney General and the State Comptroller. We’ve been working diligently on the transition for more than a year.
Importantly, the Operations Services Agreement is structured in a way that aligns LIPA’s and PSEG Long Island’s interests. We will receive a flat fee for providing the management services, with a potential to earn financial incentives keyed to achieving significant improvements in customer satisfaction and other performance metrics. For example, there are incentives in the contract – and our plan is to achieve – a first-quartile customer satisfaction ranking within five years. Also, any cost savings and efficiencies that are achieved in the process will flow through to Long Island customers. In short, our success will be closely linked to our ability to improve the customer experience.
PSEG has created PSEG Long Island as a separate subsidiary dedicated to managing its Long Island responsibilities. This subsidiary, its management team, and the assets required to manage operations will be located on Long Island, an arrangement that will increase transparency and focus attention on the needs of Long Island’s electric customers. It is also our intention to incorporate the current workforce into our Long Island operations. Our management team will live on Long Island and will be visible and available. PSEG and its family of companies have a long history of involvement with the community and community service and this will be a core value of our Long Island business.
As noted, we bring to this task an established record of performance, reliability, and customer satisfaction. We’ve been hard at work in the transition and we think we understand the challenges. We’ve identified specific areas for improvement and we are developing the plans and processes to address them. We will be ready to make a difference on Day One. In consultation with LIPA and subject to its approval, we’ll implement:
- Improvements in Customer Service and Customer Satisfaction:
- New call center and state-of-the-art customer-facing technologies
- Enhanced customer and stakeholder communications using multiple channels of communications and all available media technologies
- Best-in-class customer service Quality Assurance and Quality Control (QA/QC) processes
- Proven storm restoration processes:
- State-of-the-art outage management technology
- Enhanced storm planning and a management structure that better consolidates and coordinates outage management and storm response
- Logistical plans necessary to make the most efficient use of outside work crews and marshal the equipment and resources necessary for responding to a major storm
- Best industry practices in transmission and distribution (T&D) electric system maintenance and operations
- Data-driven analytical tools, including lean six sigma and a balanced scorecard process, to optimize T&D asset management
In the area of customer operations, we’re implementing over 80 recommendations to improve service and customer satisfaction. LIPA has approved our recommendation to replace the existing call center Interactive Voice and Response (IVR) system and we’ve mapped plans for replacing the current Customer Information System (CIS) and for implementing a new Enterprise Resource Planning (ERP) system.
We’ve also proposed a new Outage Management System (OMS) that will more quickly and accurately assess and locate system damage, direct work crews, and provide critical information on status of repairs.
Our experience in New Jersey during Super Storm Sandy provides some guidance on how technology, processes, and planning come together to benefit customers:
Sandy knocked out electric service to almost 2 million of our utility‘s 2.2 million electric customers. About a third of our system’s major switching stations and 40% of our substations were affected, many by significant flooding. And about 33% of our transmission circuits were damaged.
About 1,000 out-of-state workers arrived in New Jersey in advance of the storm and that number grew to more than 4,500 during the restoration effort. We were able to make sure that all of these workers were housed, fed, and their vehicles had fuel. These workers knew where they were going, had work orders in hand, and were able to get on the road with little wasted time. All of our workers had the material and supplies they needed. We never ran out of poles, transformers, wire, or fuel.
We restored electric service to more than one million customers in three days. Over the two-week period that included the Nor’easter that hit on the heels of Sandy, PSE&G restored power to more than 2.1 million customers. This is more than in any storm in the history of any electric utility in the nation. We accomplished these service restorations at a cost of approximately $295 million.
And all through this process we worked diligently to provide as much and as accurate information as possible to customers, public officials, the news media, and other stakeholders. In particular:
- In advance of the storm, pre-emptive calls were made to more than 700 municipal officials to provide points of contact for use during restoration
- Daily conference calls were held that linked our electric operations divisions, regional public affairs managers, and municipal officials to provide updates on restoration planning and progress
- Ralph LaRossa, PSE&G’s president and chief operating officer, and other senior executives, held face-to-face meetings with more than 100 state legislative leaders and mayors
- Two conference calls a day were conducted with New Jersey Governor Chris Christie
- Company executives held daily news media conference calls
- Newspaper, radio, internet ads, and email blasts were used to communicate storm preparation, damage assessments, outage updates, and restoration progress
- Social media played a key role in customer communications
It is this kind of effort –planning, logistics, up-to-date technology, proven processes and procedures, analytics, and communications – bound together by a relentless focus on the customer that PSEG Long Island is bringing to the task of managing Long Island’s electric system. We think we know what needs to be done and we look forward to the opportunity to serve the people of Long Island.
Thank you and I’d be happy to respond to your questions.
LIPA Disaster: Blame Cuomo, Not Privatization
Posted by wilderside http://www.onthewilderside.com
Andrew Cuomo is the smartest Tea Party Governor in the nation. Cuomo wins this year’s Scott Walker false narrative award. Cuomo has done a much better job than Hostess Cakes in getting the media to adopt a false narrative. Hostess failed to get the public to believe that it was the union that caused the failure of the company’s investors and financial officers over a decade. Hostess failed to get the media to adopt its false narrative wholesale.
Cuomo, on the other hand, has been trying to privatize LIPA since he came into office while let the company decline through his negligence in not appointing a new CEO or new board members. Now when his neglect has created this disaster, he proposes the same solution of privatization.
And the media all believe Cuomo’s false narrative that LIPA alone, not the Governor, is at fault. Even worse they are going to the Governor for the solution, privatization, which he was proposing years before this crisis. As the 2008 Green Party presidential candidate said about the failed economy, “The people who got us into this mess are not the ones to get us out of it. “
To recap, NY Governor Andrew Cuomo has failed for the last 2 years to appoint a CEO for LIPA. Failed to fill the empty board seats. Failed to replace the board members whose terms ended. And yet Cuomo blames LIPA is to blame for its lack of efficiency. What’s Cuomo’s solution for LIPA’s problem? Privatization. The same idea he raised a year ago, when he failed to do anything about appointing new leadership to LIPA.
If Cuomo thinks a private entity is more efficient maybe we should replace him with one. He has failed to do his job for the last two years. The only thing that he has done efficiently is distract Long Islanders from realizing he is to blame for the LIPA mess.
Let’s look at the brilliant idea of “improving” service by turning it over to a private company. Does anyone remember that LILCO was the most hated utility in the nation? And furthermore, it was National Grid that is responsible for maintaining the whole power system. National Grid is already are a private company. And they took forever to get the work done.
Some of the media, like Newsday, have put forward the craziest excuse to turn LIPA private so it can come under the Public Service Commission (PSC). LIPA is already a public authority. The Public Service Commission is a public authority. If LIPA being a public authority is a bad idea, then how is having a private company under the public authority of the PSC a good idea?
Furthermore has anyone of you tried to call the Public Service Commission to complain about your phone company? Good luck. Why would they do any better job taking complaints about an electric company?
in 1985, Governor Mario Cuomo drove the bus over Long Islanders by saddling us with LILCO’s bad decisions on Shoreham Nuclear Power Plant and the monumental debt it incurred while he sold off all the valuable assets of LILCO to a private company. Now Governor Andrew Cuomo is trying to back the bus back over us by taking away the little we have left and putting us back under another LILCO. No thanks. This is explained in more detail in our August 11, 2012 post Tell Gov. Cuomo: LIPA needs Elections, not more Privatization
We discussed the real solution in a 2008 post NY Governor Paterson vetoes bill to provide LIPA accountability which was quoted in Karl Grossman’s 2009 article, Why should LIPA be afraid of Suffolk?:
“LIPA was supposed to become the people’s power authority. That has not happened,” declares Ian Wilder of North Babylon, [former] co-chair of the Green Party of New York State, on his website. “When LIPA was first set up, there were supposed to be elected members of the LIPA board … That never happened. They are all appointed; with no accountability to the public …
As we have been saying for the last five years on this website, we need to finally get the deal Long Islanders agreed to when we were saddled with LILCO’s problems. Let’s let the Long Islanders finally take direct control of the utility. The private sector and the governor both had their chance. They messed up. As we stated in a October 28, 2012 post Is it time to turn LIPA back into a people’s power authority for Long Island?:
What should Long Islanders who care about LIPA bills, and/or energy issues, and/or basic fairness do?
First of all, let’s at least force Andrew Cuomo — the Democratic Party governor — to re-appoint or not re-appoint the current Chairman and trustees.
Second of all, let’s look into making LIPA trustee an elected position, as it always should have remained.
Business Manager Don Daley added that “Local 1049 urges that there be no rush to judgment on supporting any plan
Hauppauge At their Union Hall, the leadership of the International Brotherhood of Electrical Workers Local 1049, led by Business Manager Don Daley held a town hall style Q&A with key elected officials and representatives from the State, County and Town government to explain in detail staffing and management issues with the future LIPA operating services agreement (OSA) which essentially splits up the storm restoration workforce. Over 60 people attended the meeting with community leaders and ratepayer advocates.
An informative power point outlined hard truths that the current LIPA model keeps all the electric and gas utility workers available for storm response. When a storm hits, National Grid utilizes all employees in the restoration effort. A gas mechanic who traditionally works on the gas pipeline is also trained and qualified to install residential electric lines during emergency response. Daley’s presentation showed exactly how gas and electric ratepayers benefit from daily workforce synergies and how many Long Island workers will be staying home in the next storm.
”We have been communicating our concerns with this OSA for 15 months now, even before Hurricane Sandy hit us”, said Daley. “There will be less people who are cross trained to respond during storm restoration when the next major storm hits, whether that storm is big or small. The future plan will even make small storm response difficult and expensive for the ratepayer. We will have to rely on off-island out of state utility crews.”
A point was raised by a community activist that PSEG, the new owner of the OSA, should be required to increase staffing levels to meet storm restoration needs. Daley responded to the question by stating that if PSEG was required to increase staffing levels, that would be one way to address the dangers of being understaffed during the next storm response , but that it may not make economic sense.
Graphs during the presentation showed that the future OSA will essentially split the workforce in half. One graph showed that in the next storm, over 1,800 trained utility professionals will be staying back. The presentation also explained in detail how synergy savings work in departments like human resources, billing and collections. The new OSA will essentially split up the workforce, creating unnecessary overhead which will be passed onto the already overburdened ratepayer.
Business Manager Don Daley added that “Local 1049 urges that there be no rush to judgment on supporting any plan, whether it be privatization, making LIPA a full municipality, or a public-private partnership. This decision had implications for the provision of essential utility services to millions of customers. Our Long Island neighbors depend on this essential service to provide safety and comfort. We consider this to be the highest priority and IBEW 1049 needs to be at the table.”
“Gov. Andrew M. Cuomo, in an appearance on Staten Island, reiterated that contrary to a 2010 report the state can privatize LIPA without hiking consumers’ electricity rates”….
How is this even possible???? why such a closely guarded secret ?…the only reason why the governor does not show the facts is because there is none! Its only politics that he is going to use to sell this travesty of converting LIPA to a Private Utility.
Two separate independent reports have stated that the private model will result in increased rates by up to 20%. There is no FEMA reimbursement for storm restoration such is in the case of the billion dollar storm damage bill that rate payer will have had to pay if it were private. That alone would have resulted in a 20% rate increase….
Governor Cuomo just show the ratepayer the facts…
By Yancey Roy Newsday 2/25/2013
Amid the Cuomo administration’s push to privatize the Long Island Power Authority, Sen. Carl Marcellino has slated a hearing on the utility’s future.
Marcellino (R-Syosset), head of the Senate Committee on Investigations and Government Operations, will convene the hearing Wednesday at the state Legislative Office Building. Among those scheduled to testify are Neal Lewis, a LIPA trustee, and David Daly, a vice president of Public Service Enterprise Group (PSEG), the company that is set to take over operation of the Long Island power grid from National Grid.
Meanwhile, Gov. Andrew M. Cuomo, in an appearance on Staten Island, reiterated that contrary to a 2010 report the state can privatize LIPA without hiking consumers’ electricity rates.