FLAWED BRATTLE REPORT TO BE USED AS A BASIS FOR RATEPAYERS FUTURE


The decision on the future structure of LIPA to be made by its Board of Trustees on October 6th will affect every Rate Payer for many years. For that reason you would expect this decision to be based upon sound and accurate data.

Twenty nine days before the decision 33 pages of supporting data (Brattle Data) was released for public review and comment. Unfortunately, in spite of the $1.5 million it cost to generate this data, its accuracy is very much suspect and in some cases completely incorrect.

With no listing of assumptions, constraints and risks accompanying the data, it almost appears that it was generated to support a preconceived notion to retain LIPA’s existing
SERVCO type of structure. Perhaps a more appropriate chronicling of assumptions could have eliminated much of the data inaccuracies that are evident.

For the most part it is obvious that out of 3 possible LIPA structures, the privatization model is not viable, leaving two other options, SERVCO (basically as is) or a Full Service MUNIcipalization. But a further review of the data for these 2 options reveals several
examples of inaccurate data producing flawed conclusions.

Specifically, in the “Operations Low Case Option” it is clear that the MUNI option would be the most cost effective. Nonetheless, in the public presentation it appears that the numbers were transposed for the SERVCO and MUNI options to reflect the SERVCO option as being the most cost effective.

The Brattle data also reflects a negative impact of $10 million in property tax/PILOTS for the MUNI Option and none for the SERVCO option. This is contrary to what reasonably would be expected to be the case.

Further in the Brattle data, operational costs of the SERVCO option suggests an average labor Rate for T&D Operations Maintenance employees of $46,827. However, by using storm data costs (not including overtime) previously supplied by LIPA this figure is understated by approximately by $37,000, translating into a misrepresentation of the SERVCO costs by over $19 million.

It was stated and documented (Page 34) in Brattles’ power point presentation that the SERVCO option “requires somewhat duplicative management”. However, in the Brattle
staffing data, requirements are actually projected to be reduced with the SERVCO
option. This definitely conflicts with the increased staffing level noted for the MUNI option where duplicative management would be eliminated. The result is a $3 million penalty for the MUNI option. This includes adding positions for Human Resources which cannot be substantiated. There is no reason to staff the NEW LIPA with 44 Human resource people to support 2072 employees. Industry practice is to have one HR person for every 100 employees and not one for every 46. Furthermore, 15 additional Information technology staff were added to the MUNI option and not for the SERVCO option with no valid justification. Standard industry practice typically staffs Information Technology
Projects as a short term contract and operational support provided by in-house staff.

Finally, the Brattle Data reflects a $13 million penalty for the MUNI option because computer system costs would be 20% more due to a loss of purchasing power. On its face this sounds absurd because the MUNI option could take advantage of the buying power as a governmental entity. If anything there should be a discount reflected for the MUNI
option and a significant penalty for the SERVCO option.

In conclusion, because of the importance of LIPA’s upcoming decision on structure and the obvious questions raised by these discrepancies, it is vital that the Authority delay any action until all issues can be resolved.

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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
This entry was posted in brattle, lipa, long island power authority, msa, municipal power, municipalization, municpal, national grid, privatization, servco. Bookmark the permalink.

3 Responses to FLAWED BRATTLE REPORT TO BE USED AS A BASIS FOR RATEPAYERS FUTURE

  1. Rob from LI says:

    Does it come as a surprise to anyone that when asked to provide a report that will be used to justify their own continued existence they produce one that shows leaving power with them to be the only logical choice? Let’s have an independent third party NOT CONTRACTED BY LIPA look at the situation. Otherwise we’re asking the cat if we should leave it alone with the bird.

  2. I just wonder how they are getting away with stealing our money every month… I had no power for five days after the storm…. No power coming into my home… Yet I was charged over $ 30.00 dollars for power supply/// I had no power at all coming into my home..How can they charge me for some thing they didn’t supply?????? LIPA is and has been out of control for far to many years now…. How long do we let them get away with this???/ Total bill is for 82.69… No AC, my washer was down for three weeks and no power to my home… Last month it was $ 67.84, my ac was going, my computer was working.My washer was working…. How do they get there numbers??/ My bill has almost doubled from last year yet they tell me they lower our bills…. I just don’t see it…. Sharon Walters

  3. Charles A. Hersh says:

    Hello

    None of the three options for LIPA address the real problems why electric rates are so high.
    Michael Hervey already admits there are three factors which are, the Shoreham debt, wasting fuel by innefficient power plants and the pilot overpayments for these innefficient power plants. May I suggest a fourth option of Bankruptcy for LIPA. The ratepayers need a fresh start from these obseen overcharges and National Grid should no longer be allowed to continue pasing on excessive fuel charges without these old plants repowered. We need a break. LIPA’s rates are neither reasonable nor competitive. Also, this huge bebt should be set asside as a failing investment its creditors. In other words we should be charge fair and competitive rates while innefficies are fixed. We should no longer be compelled to pay for all these excesses.

    Regards
    Charles A. Hersh

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