Thiele: LIPA's Privatization Proposal Is Déjà Vu All Over Again

We did not need Hurricane Sandy or a State Commission to inform us of the obvious. Long Islanders have known for many years that its power company was unaccountable and lacking in transparency, controlled by the Albany political establishment. The result: (1) continued high rates because of a substantial and growing debt, (2) poor service because of years of lousy management by political appointees, and (3) the lowest customer satisfaction in the nation.

The proposed answer from the same Albany establishment: sell LIPA to a private company, depend on the State Public Service Commission (PSC) to protect Long Island, and run for the hills.

Has everyone forgotten that it was a private utility, the Long Island Lighting Company (LILCO) and the State PSC that got us into this mess in the first place? The State PSC allowed the irresponsible management of LILCO to saddle Long Islanders with a $6 billion liability in connection with the Shoreham debacle. LILCO was even forced to settle a Racketeer Influenced and Corrupt Organizations (RICO) lawsuit in connection with Shoreham.

It sounds like déjà vu all over again. We know that the substantial federal tax benefits of a public utility would be lost with a private utility. We know that the new private company would be accountable to its stockholders, not the public. We know that not a word has been uttered about the current $7 billion LIPA debt. We are told to just trust the Albany establishment and rates will be frozen for the next few years.

I didn’t believe the promises when the original LILCO deal was cut. I didn’t believe it when the National Grid transfer was approved. And I don’t believe it now.

The original intent of LIPA, a true public utility governed by Long Islanders, has never been fulfilled as it was envisioned when Governor Mario Cuomo signed the LIPA legislation in 1986. It has never been governed by Long Islanders, and it has never been a “real” utility. It has never been more than a “shell” corporation operated by political appointees who then contracted out operations to another private company. The predictable result of this “Rube Goldberg” contraption: a disaster for Long Island.

I will await further details about this proposal. However, if history is any indication, it won’t add up. We should be looking at other alternatives.

Here are just a few:

1. LIPA Trustees should be elected by Long Islanders, not appointed in Albany.

2. If Albany doesn’t want to continue LIPA as a State public utility, then permit local governments to operate true municipal power companies, as is the case upstate and in places like Greenport, Rockville Centre, and Freeport on Long Island.

3. Require LIPA to sell its 18% interest in the 9-mile point nuclear facility to defray part of its current debt.

4. Finally, the issue of energy policy on Long Island will never be truly addressed until the existing $7 billion debt of LIPA is resolved. Long Island’s economy will never be truly competitive while this liability hangs over us.

This debt was not created by hard working Long Island residents but by a corrupt, incompetent, private utility and a lax State regulatory structure.

In the last five years, we have seen government intervention in the banking and financial industry and in the automobile industry because they were “too big to fail,” while the perpetrators of the worst recession since the 1920s escaped responsibility.

Innocent Long Islanders have been equally victimized by corporate greed and lack of regulatory oversight. Long Islanders have paid the price for years with some of the highest utility rates in the nation. There is no relief in sight. Aren’t more than 2.5 million Long Islanders also too big to fail?

The LIPA problem will not be solved by simply kicking it back to the private sector. Furthermore, Long Island cannot create a sustainable and viable energy future or a competitive economic climate until the LIPA debt issue is resolved.