Politics & Government

LIPA Tax Challenges Would be Forgiven and Reductions Phased Out, Says Marcellino

State legislature passed LIPA restructuring bill late Thursday.

Senator Carl Marcellino, R-Syosset, said Friday that a deal has been reached to "forgive the LIPA filed tax challenges and insure any reductions are phased out through a glide path.”

The details of the deal are unclear and officials have so far been reticent to comment on the bill to restructure the burgeoning utility which passed in the state legislature Thursday afternoon. 

It's not clear what next steps the Town of Huntington will take to fight LIPA's tax grievances since launching a campaign earlier last week to persuade Gov. Andrew Cuomo to include a dismissal of the tax grievances in his bill. 

Town and village representatives have only said that they need additional information on exactly what provisions have been laid out.

Under Cuomo's plan, LIPA will be semi-privatized and put under the full authority of PSEG, a publicly traded energy holding company based in Newark, for the next 10 years.

LIPA will in effect be reduced to a holding company with a significantly reduced staff, according to a release from Cuomo's office, set at levels only necessary to ensure that the authority is able to meet its core obligations, and with a new board reduced to nine members. 

Cuomo said this would maintain the utility’s eligibility for FEMA and tax benefits, but would offer the benefits of PSEG Long Island’s more efficient management structure as a private company. 

Since the late 1990s, LIPA’s debt has not decreased and represents almost 10 percent of ratepayer bills. Escalating property taxes have also contributed to high rates. 

To provide relief for ratepayers, Cuomo's legislation will reduce the cost of LIPA’s debt, by refinancing up to half of the $6.7 billion debt at a lower interest rate, and a 2 percent annual property tax cap will be established for the transmission and distribution system. It will also eliminate state gross receipts tax to save ratepayers $26 million per year. 

As a result of these and other expected savings in the Governor’s legislation, LIPA and PSEG Long Island are seeking a rate freeze for 2013, 2014 and 2015.

Under the legislation, utility performance and rates would be subject to tougher state oversight under a new Long Island office of the Department of Public Service (DPS) which will have the authority to review PSEG Long Island’s operations and issue recommendations to the LIPA Board for implementation. 

Proposed rates would undergo an independent review by DPS that would include public hearings. DPS would also perform independent reviews of PSEG Long Island’s storm preparedness and performance. This oversight process will include reviewing whether PSEG Long Island has met performance metrics and the appropriateness of storm costs, and make recommendations to adjust compensation accordingly. Capital planning would also be subject to DPS review on an annual basis, and the State Comptroller would retain the auditing powers that it currently holds. 

The new Long Island utility will also remain committed to renewable energy and becoming more energy efficient. Under theGovernor’s legislation, the new utility will not only design and administer efficiency and renewable programs, and continue recently approved renewable power procurement programs; it will also be required to produce a new capital and operating plan. The plan will include recommendations for energy efficiency, smart grid solutions and distributed generation to give customers more value and reliability from their service.

The Governor’s office has also secured an agreement between National Grid and PSEG to make additional workers available to help with power restoration efforts during storms. National Grid has trained some of its IBEW gas utility workforce to perform various storm response tasks for the electric system, including storm damage assessment and restoration work. The agreement will allow these workers to be included in PSEG’s storm response plan, which means hundreds of additional IBEW workers will be available to PSEG during storms providing more resources for a safe and rapid recovery.

Patch will continue to update this story as details emerge.


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