It appears that many in today’s Newsday article on PSC oversight for LIPA are tip-toeing around the need for unadulterated regulatory oversight of the utility. They fear that such an action would cause rating agencies to lower LIPA’s bond rating and increase borrowing costs. 

If this is the case, then why are most large public utilities throughout the nation subject to some form of regulatory oversight. And, in fact, why do many of those utilities have higher bond ratings than LIPA. Could it be that quality of performance counts much more than just being subject to regulatory review.

Further, it should not be overlooked that any risk to LIPA’s bond rating would be more than offset by the potential savings from rigorous third-party review. Witness the almost $400 million in overcharges to LIPA’s customers this year along with the excessive charges for Hurricane Earl, the storm that never was, that could have been avoided or at least minimized through regulatory action.
It is time to protect LI ratepayers naked to the ravages of a utility totally immune from formal oversight and criticism. Long Islanders need the PSC to have complete regulatory authority over LIPA and the ability to take decisive action when the utility does not function properly.

LIPA bill sponsors, Cuomo staff to meet
Updated: November 7, 2011 9:34 PM

Legislative sponsors of a bill seeking regulatory oversight of Long Island Power Authority rate increases will meet with Gov. Andrew M. Cuomo‘s staff this week to explore alternatives as the clock winds down for action on the proposed law.

The challenge: finding a way to circumvent concerns that the bill as written could trigger a downgrade of LIPA’s bond rating, thus increasing the authority’s borrowing costs.

One proposal that will be hashed out this week would allow for outside scrutiny of LIPA rate hikes of 2.5 percent or above by an administrative law judge with support from Public Service Commission staff. Rather than approve or reject the hike, the judge would present a report and recommendation, but leave the ultimate decision to LIPA trustees, legislators said.

No specifics yet

A Cuomo spokesman declined to discuss specific alternatives.

“Conversations are still ongoing to fashion an agreement that protects ratepayers and reforms the system,” spokesman Joshua Vlasto, said.

State Sen. Kenneth LaValle (R-Port Jefferson), who sponsored the bill with Assemb. Robert Sweeney (D-Lindenhurst) said he could support a measure that involves a PSC-type rate review, so long as trustees give the proper weight to the law judge’s recommendation.

“There would be enormous political pressure on trustees who dismiss a finding that would suggest a rate increase is not warranted,” LaValle said.

Sweeney said he has indicated to Cuomo’s staff that he’s willing to discuss alternatives to the legislation, so long as they provide “meaningful” oversight on rate hikes.

But Sweeney said giving trustees the final approval, even after an outside review, “is something I don’t think is credible. LIPA has always found ways to avoid the regulatory process.”

Some risk involved

Yet, putting the review entirely in the court of the PSC could be a risk, LaValle said, if bond-rating firms downgrade LIPA.

“We have to talk this through because no one, including myself at this juncture, wants to go to the crap table and roll the dice to see: Are we or are we not going to downgrade their bond rating?” he said.

Backers of the bill as originally passed say more scrutiny of LIPA finances should strengthen Wall Street‘s confidence in LIPA, not damage it. But bond-rating firms find fiscal comfort in LIPA’s ability to raise rates as needed.

The bill that passed both houses of the legislature this summer would subject any LIPA rate hike of 2.5 percent or above in a 12-month period to a full PSC review — even those rooted in higher fuel costs.

Neither the current bill nor any proposed amendment would provide a venue for ratepayers who have complaints about LIPA service.

Customers of other regulated utilities in the state can call or write the PSC directly when they have complaints about their utility.

LIPA is scheduled to release its 2012 budget, including any proposed rate actions, this week. LIPA opposed the pending legislation, though it has said it is open to reviews of its finances.


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 bond rating, Oversight and tagged , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s