The following was originally posted in November 2011. It now appears that everyone agrees the existing LIPA structure does not work and must be changed however more importantly the same mistake must not be made with privatization…the ratepayer can’t afford it….
The LIPA Board of Trustees engaged the Lazard financial advisory firm in 2009 to update LIPA’s 2005 Strategic Organizational Review, and address important questions concerning LIPA’s future. The report was presented to the board of trustees in February 2010 discussing in part four possible business models for LIPA’s future organizational structure:
1. Status Quo, in which LIPA would negotiate a with National Grid for an extension of the term for operation of the system;
2. Competitive outsourcing of the operation of the system as a “public‐private partnership”
3. Full Municipalization of the operations, in which the currently outsourced services would be brought into LIPA to form a single integrated organization.
4. Privatization of the system, in which LIPA would exit the utility business by selling the system to a private firm.
Lazard’s report discussed the benefits and considerations of the business models in a qualitative manner but asserted that “LIPA currently lacks the detailed information to properly evaluate the MSA as compared with other options it could pursue.”In responding to this, LIPA subsequently engaged Navigant Consulting to prepare a high level revenue requirements analysis of the business models to examine ratepayer concerns and the financial impacts of each strategic option.
Navigant delivered its report to the LIPA Board of Trustees only in May 2010 concluding that the Full Muncipilization model was the most beneficial for ratepayers.
Very recently, the Brattle group delivered another report to LIPA’s Board of Trustees performing yet another analysis of business models. In it they recommended that the ServCo model (Competitive Outsourcing) be selected for restructuring. Responding to this, the LIPA Board of Trustees decided to adopt the ServCo model, completely ignoring Navigant’s finding that the Full Municiplization model would be the least costly for ratepayers.
This is an unfortunate turn of events leaving the ratepayer once more out in the cold. Hopefully, the LIPA Board will reconsider its actions before time runs out and do what is best for its customers.