BUSINESS MANAGER: PENSION LIABILITY QUESTIONS NEED TO BE ANSWERED BEFORE AWARDING CONTRACT


Discussions surrounding the $600 Million Pension liability have been taking place for many years with no obvious resolution, so why would we be led to believe that these very same questions will be answered by October 6th which is the date that LIPA Trustees will be rendering its decision on LIPA’s future structure?

There is no indication that LIPA will delay its decision therefore what will the National Grid unionized workers do when this decision is made and the pension questioned goes unanswered?…..work stoppage?

Or is more likely the case LIPA will throw ratepayer money at the situation to make it go away?

There is probably no doubt that this dispute will have to be resolved in court as $600 million cannot be reasonably negotiated in two weeks.

Even though the Board of Trustees do not “report” to the Governor  however he is the only one to right the sinking LIPA ship.

Excerpt from Newsday article:

“Robert Shand, business manager for Local 1049 of the International Brotherhood of Electrical Workers, which represents thousands of National Grid unionized workers, said, “”While it is my understanding that the National Grid pension plan is funded up to and over the [federal] requirements, there is some continued discussion over future obligations.” He added, “It is my opinion that all these questions need to be answered” before a contract to manage the local grid is awarded. “We are proceeding to ensure all pension obligations for all our members are up to date and in compliance with all federal regulations,” Shand said.”

LIPA trustees face $600M pension liability

Updated: September 21, 2011 5:26 PM
By MARK HARRINGTON        NEWSDAY

With a decision about LIPA’s future structure expected in just weeks, authority trustees are confronting a decade-old contract dispute that could leave ratepayers on the hook for up to $600 million in retiree pension costs.

The revelation, shared with most trustees just last week, comes as a State Senate committee on investigations is meeting Thursday morning to question LIPA and other utility officials about the response to Tropical Storm Irene. The meeting, at 9:45 at the Nassau County Legislature in Mineola, precedes a LIPA trustees meeting at noon at its Uniondale headquarters.

In addition, 17 of the 18 members of the Suffolk County Legislature last week wrote Gov. Andrew M. Cuomo to ask him to delay the Oct. 6 decision about LIPA’s future structure for two months to more deeply probe its implications and open it to public hearings. The legislators also urged that LIPA be subject to “full Public Service Commission regulation.” A spokesman for Cuomo didn’t immediately reply to a request for comment.

Trustees were confronted with questions about the retiree pension costs during an outside consulting group’s exploration of the possible costs to LIPA of future structures. Although they determined that the pension liability won’t affect the decision, the issue prompted discussion about how LIPA would fend off any effort by National Grid to turn to LIPA to fund the liability, according to several trustees.

LIPA has asserted since 2000 that the pension costs, originally $250 million to cover the costs of benefits for former Long Island Lighting Co. workers, rested with the former KeySpan. National Grid bought KeySpan in 2007. People familiar with more recent estimates say the pension funding obligations ballooned over the years as a result of Wall Street declines and other economic factors.

LIPA trustee Larry Waldman said trustees were first confronted with the pension-cost dispute after The Brattle Group, a consulting firm hired to recommend a future structure for the authority, examined the costs for several different future scenarios for LIPA. But the dispute does not appear to have been part of public hearings, or Brattle’s public presentations.

Though LIPA officials have assured trustees that the pension issue won’t impact the decision about LIPA’s future structure and that LIPA isn’t responsible for the cost, it nevertheless looms large as new regulations require that retiree pension plans be properly funded for future benefits.

Waldman said that although he didn’t know specifically how much the liability may have increased, he said he expects it has increased markedly given “market returns, which haven’t been spectacular for anybody.”

It’s unclear whether National Grid has asserted that the costs of the pension plan rest with LIPA. A spokeswoman on Tuesday said the company would not speak about the issue.

“We have no comment at this time on the retiree benefits matter given the pending LIPA [contract] procurement process,” she said.

LIPA spokeswoman Vanessa Baird-Streeter, in a prepared statement, indicated the cost rests with National Grid.

“National Grid, as the employer and sponsor of its employee benefit plans, carries the liability for these plans on its books,” she said. “LIPA has made all payments required by the contracts to date. We do not expect any lump sum payment to be due at the end of the [contract]. This issue has no effect on either LIPA’s strategic analysis or the current [contract] evaluation and selection process.”

But trustees view it differently. “It’s a huge number . . . It needs to be resolved,” said trustee Neal Lewis. Robert Shand, business manager for Local 1049 of the International Brotherhood of Electrical Workers, which represents thousands of National Grid unionized workers, said, “”While it is my understanding that the National Grid pension plan is funded up to and over the [federal] requirements, there is some continued discussion over future obligations.” He added, “It is my opinion that all these questions need to be answered” before a contract to manage the local grid is awarded. “We are proceeding to ensure all pension obligations for all our members are up to date and in compliance with all federal regulations,” Shand said.

Waldman said many questions remain and that it appears to be more of a legal issue than an accounting one. “There’s some question about whose liability it is,” he said.

In any case, Waldman said, if it’s ultimately resolved in National Grid’s favor, “It can at some point have an effect on rates. It may not be in a year or five years. I just don’t know what the impact will be.”

Peter Schussler, a member of the Suffolk legislature’s LIPA Oversight Committee, said he expects National Grid to assert LIPA’s obligation to pay. He cited the timetable for new pending funding regulations, the “risk that National Grid will not win” the LIPA contract and the size of the liability, which he concurred is about $600 million.

“National Grid cannot be too happy at all with this sizable liability on its books,” he said.

The dispute first reared its head in 2000, according to a 2004 lawsuit filed by a former KeySpan employee, Robert Mahony, who alleged he was terminated for bringing information about KeySpan’s accounting treatment of the liability to his superiors. KeySpan had treated the original $250 million as a “receivable” from LIPA, meaning that it expected LIPA to pay it.

But LIPA’s controller, Kenneth Kane, in an email cited in the suit, argued that LIPA’s liability was “zero,” and predicted the ultimate resolution of the matter remained with “the attorneys.”

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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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