Moreland Commission December 11, 2012

Statement of Dr. Matthew Cordaro  Before the Moreland Commission

December 11, 2012


Thank you for the opportunity to appear before you to discuss emergency preparedness and the response of utilities to recent storms, as well as recommendations for improvement. For the most part utility storm response is specific to individual systems and some utilities are better prepared than others. Unfortunately, here on LI the Long Island Power Authority (LIPA) is not a utility that acceptably manages storm emergencies.

Beyond specifics, the root causes for this could very well be the absence of meaningful regulatory oversight and an unusual utility business structure which relies on a major contractor to operate its system.

Without professionally based regulatory over sight, there is no authoritative outside review of the adequacy of LIPA’s preparation for storms and no evaluation of the utility’s performance in restoring service or in following up on lessons learned.

In addition, LIPA’s odd organizational structure creates confusion on accountability, control and communications, as well as questions on who is responsible for what during storms, especially in the eyes of the public.

Following a public outcry in the wake of tropical storm Irene, Governor Cuomo requested the PSC to coordinate a review of LIPA’s performance in restoring service. For this purpose, the PSC retained Vantage Consultants to conduct an audit, which in the end produced 100 findings and recommendations. Many of these findings and recommendations supported observations made previously by the LIPA Oversight Committee.

Vantage saw poor communication as probably one of the most important problems in Irene. Customers could not reach the utility and when they did there was little or no information made available. At the same time government officials were unable to obtain updates from LIPA to pass on to their constituents. More troubling, the utility experienced problems with its own internal communications hindering recovery operations.

Vantage observed that a particularly significant problem with communication was LIPA’s inability to provide an estimate for restoring service because of deficiencies in damage assessment and an antiquated outage management system which LIPA had failed to replace in response to a 2006 consultant’s recommendation. Additionally, it was evident that LIPA had not fully implemented recommendations from its Lessons Learned study of the severe March, 2010 storm.

Another important deficiency cited by Vantage was in tree trimming. Contrary to the many LIPA assertions about an aggressive tree trimming program, Vantage viewed efforts in this area not being up to industry standards, along with measures taken in storm hardening, something that would become quite evident in the aftermath of Sandy.

Glaringly, many of LIPA’s specific shortcomings in responding to Hurricane Sandy duplicate exactly what was seen in Irene. Again severe problems with communication and a deficient outage management system plagued the utility. The band aids LIPA applied in these areas following Irene simply did not work. In fact at one point during Sandy the utility had to abandon its patched outage management system.

The results of substandard tree trimming and storm hardening programs also produced significant damage to transmission and substations. As a consequence, LIPA was not able to restore large numbers of customers in the first days following the storm, which usually occurs with the rapid repair of transmission lines and substations in most other storms. This no doubt significantly extended the amount of time it took LIPA to restore most of its system.

The answer to why LIPA has not implemented corrective measures from experience with previous storms may be because it is not subject to regulatory oversight and operates with an organization structure unlike any other public utility in the country.

Most of the other 2000 public utilities in the US function with some form of regulatory oversight and are organized as full service municipal utilities not depending on outside contractors. Testament to the benefits of this are the competitive rates and high customer satisfaction levels maintained by many of these utilities.

In whatever form LIPA ultimately takes, it should be subject to formal regulatory oversight. This would ensure ratepayers are fairly treated and that the utility would be managed responsibly knowing its decisions would be scrutinized by regulators.

In addition, LIPA should be reorganized as a full service municipal utility. Under this structure, the utility would be led by a professional management team overseeing all functions to be carried out by LIPA workers and not major outside contractors. Such reform would remedy many of the problems LIPA now encounters in storm situations by establishing clear accountability and control while providing the means to ensure timely communication and operational efficiency. Overall, it would also reduce costs for customers, improve efficiency and eliminate duplication of effort.

Full sevice municipalization is a realistic option for LIPA reform. It has the potential to provide the operational improvements perhaps possible with privatization, without this alternative’s higher costs due to reliance on taxable debt, return on investment and income tax liabilities. It could also be achieved quite rapidly without major legislation.

Clearly the severity of Sandy would have presented a challenge to even the most prepared and well run utility. Nevertheless, LIPA’s performance in response to this storm was obviously unacceptable. To correct this problem, it is essential that the authority become regulated and restructured as a full service municipal utility.

Thank you for this opportunity to appear before the Commission. That concludes my remarks.


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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