LIPA Gifts Nassau County $25 Million without Authorization


Suffolk County presented evidence in its litigation against LIPA arising out the Shoreham Settlement Agreement of January 11, 2000, that LIPA, in a side agreement,  made an unauthorized additional $25 million rebate to Nassau County rate payers in the year 2000, and also made additional gifts, totaling $25 million, to Nassau County to enable it to reduce its budget deficit.

Suffolk County’s forensic experts believe these expenditures were contributing factors to LIPA’s fiscal problems, and tight liquidity. Additionally, LIPA was forced to admit that it made false and misleading statements in its Official Statement accompanying the sale of the ShorehamSettlement Agreement Series 2000A bonds, and that it used the investment
earnings of $18.3 million derived from a risky Repurchase Agreement investment of $224 million to partially fund a $25 million gift to Nassau County. This action was in total contradiction to what as LIPA was obligated to do, reduce the Shoreham debt of the Suffolk County rate payers. LIPA choose instead to fund a $25 million gift to Nassau County, which required LIPA to kick in an additional $6.7 million of its cash reserves. The end result is an excessive yearly Shoreham Surcharge factor imposed on Suffolk County rate payers.

The Moody report also finds that   “LIPA’s three year average debt service coverage ratio is approximately 1.05 times, versus an “A” scoring range of 1.5 to 2.0 times indicated for electric distributors in Moody’s 2008 U.S. Public Power Electric Utilities rating methodology (the Methodology)”.

Moody’s statement that:

 “Although we believe the Governor may ultimately veto this legislation, {referring to the requirement of PSC oversight}  we also believe the pressure for additional independent oversight of LIPA will persist, which could ultimately interfere with the LIPA Board’s ability to implement rate changes in a judicious and timely manner.”

must be vigorously opposed.

Moody is assuming that rate  changes will always have to be higher. It does not take into account the likelihood that a publicly elected LIPA board combined with PSC review, may result in more efficient operation, & lower electric rates.

Irving Like, Suffolk County LIPA Oversight Committee

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About lipaoversight

LIPA Oversight Committee was created to analyze the rates and practices to determine if it is working in the best interests of the Suffolk County ratepayers
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One Response to LIPA Gifts Nassau County $25 Million without Authorization

  1. Anonymous says:

    Interestingly enough a LIPA spokesman just said that LIPA is meeting its net income objectives and therefore does need a rate increase at this time.
    The Management Services Agreement (MSA) will expire in 2013, and if LIPA changes their structure, it may not have to be renewed.
    The “old, inefficient, asbestos laden polluting plants” (the same plants that Keyspan and Grid were trying to peddle to LIPA) may be contributing to the high rates, but not as much as the poor management and bad deals like the illegal MSA that LIPA signed.
    The original LIPA statute had already provided for Public Service Commission (PSC) approval if LIPA rates were to be raised more than 2.5%. It was, and is, the wiggle words like “fuel adjustments” and other charges, that were not treated as rate increases, and were allowed to passed on to the ratepayers that have to be watched.
    I don’t believe that we should be unduly concerned about an orderly transition from Grid to another vendor, or LIPA taking over as a fully operational municipal entity. When Keyspan (formerly Brooklyn Union Gas) took over they had no transition period. They could not have found the light switch if they had not hired the skilled and experienced LILCO employees. And LIPA, with some creative thinking should do the same, and thereby eliminate the profit from the structure of the “very lucrative MSA”.
    If Moody’s is trying to make the case that LIPA, as it is currently structured, is not a model of a well run company, then I am sure that we will all agree.
    This is not a bad place for the ratepayers of LI, rather an opportunity to fix what is broken, and for the first time to use the LIPA statute, as it was originally constructed to chart a new course.
    I believe that we should consider utilizing this moment to press the case for a complete change in the LIPA operating model, and with that end in mind, to all contact our elected officials and let them know what we want the to do..

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