The following piece was published in the LIBN June 24th. What is interesting is that Former chairman Bob Catell is one and the same gentleman that originally “architected” the current situation at LIPA and National Grid, and who is now pushing privatization. It should be questioned why he brings this up now and his advise should be taken with a grain of salt. The current arrangement has led to the ongoing daily debacle of inefficiency, lack of oversight and downright greed. Quite puzzling, or is it not?
By Bob Catell
I must take issue with Matt Cordaro that municipalization is the only option for the future of LIPA (LIBN May 25, 2011).
Cordaro is advocating for a transition for LIPA that puts the Long Island-based operators from National Grid into the public service. No small feat in itself, but just as Gov. Andrew Cuomo takes on the tough challenges of public pension costs and defined benefit plans, it’s hard to imagine how putting a few thousand more wage earners into the public system would result in savings to taxpayers.
Cordaro forecasts a 20 percent increase in rates if LIPA were privatized, and I have seen no analysis in the years we have looked at this to support such a number. LIPA debt, estimated at close to $7 billion, could be reduced by as much as half due to the capital received from a private sale, resulting in savings of hundreds of millions of dollars in interest. Also, a private utility could use tax-exempt financing due to the “two-county rule,” a unique piece of federal legislation which provides tax-free debt for utility infrastructures. No increase there.
And, at the risk of offending the legion of state workers who work long hours in challenging positions, few would argue that there are efficiency gains available by bringing assets in to a government operating environment. Unable to attract the skilled talent it required, LIPA spent tens of millions on outside consultants every year to help with forecasts and system oversight. Their costs would be eliminated under a private utility with rate oversight by the New York Public Service Commission.
I have maintained that the issues are complex and the best route unclear. Just as I do not advocate privatization as a singular solution, I discount Cordaro’s logic in declaring municipalization the only logical choice.
I further disagree millions have been wasted in studying a challenge with an obvious answer. We need knowledgeable professionals to instruct thoughtful political leadership on how to seek the best future for Long Island’s energy needs. I’m not sure we have done that yet and not sure we want to have this discussion for another 10 years.
Catell is chairman of the Advanced Energy Research & Technology Center at Stony Brook University and the former vice president of National Grid.