A prescription for Long Island: fixing the sins of privately owned utility operators with more privatization
The goal of affordability, however, needs to be balanced against what is required to provide reliable service: as few outages as possible. Beder told Remapping Debate, for example, that this requires “having enough reserve power…planning ahead so that there isn’t a shortage of electricity available for the demand.” Especially for distribution utilities, “The other aspect is ongoing maintenance of equipment, and both of those are influenced by ownership.”
The lesson, Patrick Lavigne, a spokesperson for the National Rural Electric Cooperative Association, the trade association for electric cooperatives, said simply, is “affordable, unreliable power isn’t worth anything.”
Paul Pallas, the superintendent of the Electric Department of the municipally-owned power system of Rockville Centre (a village on Long Island) and the president of the New York Association of Public Power, told Remapping Debate that reliability requires repairing and replacing equipment, responding quickly to outages, and performing preventative maintenance, like tree-trimming on an “aggressive” schedule. Municipal utilities, Pallas said, are more likely to meet these reliability standards, he claimed, because they are “directly answerable to the communities they serve rather than shareholders…[and] can provide that service better than an investor-owned utility.”
Ensuring reliability may not add to the bottom line, but as Tyson Slocum, director of the energy program at Public Citizen, a consumer advocacy organization, said, “I think most people don’t mind paying more for something if they are getting more in return.”
John Farrell said that he saw moving to cleaner energy sources as a “moral imperative,” though currently, he suggested, there is a wide range in how seriously utilities take this value in their operations.
Beyond meeting sustainability goals through the centralized generation of clean power (large scale wind and solar installations), Farrell suggested “utilities are going to find themselves needing to readjust their way of thinking about providing their electricity service, that reliable and affordable are going to be increasingly clean but there is also going to be a kind of paradigm shift in the way they are used to delivering electricity that involves a lot more cooperation with their ratepayers” in the creation of a distributed generation network for renewable power (such as small residential rooftop solar panels and small wind turbines).
LILCO and LIPA
Sandy was not the first time that Long Islanders have endured a hurricane, nor the first time that a storm has revealed the weakness in an electric utility on the island. In September 1985, Hurricane Gloria left 750,000 customers in the dark for up to 12 days, prompting another Governor Cuomo — Andrew’s father, Mario — to tell reporters that the Long Island Lighting Company (LILCO), the utility providing service to Long Islanders at that time, “can’t run anything.”
Least of all, it seemed, a nuclear power station. Built by LILCO between the early 1970s and the early 1980s, the Shoreham nuclear plant was protested vigorously by many Long Islanders uneasy about the safety of operating a nuclear plant on an island with few easy evacuation routes. In 1989, the Long Island Power Authority, established by then-Gov. Cuomo and the legislature in 1986 to buy LILCO assets, assumed ownership of the Shoreham plant for $1 and began decommissioning the plant before it ever produced commercial power (it ran only briefly for testing).
In 1998, however, with continued high rates for customers (partially as a result of the debt incurred in building the Shoreham plant) LIPA finally bought all of LILCO’s distribution and transmission facilities, as well as all of the $6 billion in Shoreham-related debt (which it could service at a much lower rate through tax-exempt municipal bonds).
Though publicly owned LIPA took over, LILCO never really ceased to provide electric service on Long Island for two reasons.
First, though LIPA bought most of LILCO’s electric assets (and debts), its power-generation plants and all of its gas business were sold to Brooklyn Union Gas, another investor-owned utility that had already been servicing parts of Long Island with natural gas. Upon merging, it was renamed KeySpan Energy (the company briefly went by the name “MarketSpan” during the summer of 1998). In 2007, a British investor-owned utility, National Grid, purchased KeySpan. Through a long-term “power supply agreement” LIPA continues to buy electricity from these LILCO descendants.
Second, LIPA never managed its own day-to-day operations, instead contracting them out to KeySpan (and then National Grid) through a “management services agreement.” As New York Public Interest Research Group lawyer Larry Shapiro told The New York Times in May 1998 as LIPA assumed ownership, “This is ‘meet the new boss, it’s the old boss’ routine. The same cast of characters is running this, and what you have really had here is a complicated refinancing that, while changing the ownership, retains the old LILCO to supply power and operate the system.”
In short: LILCO became KeySpan became National Grid, which still provides electric service on Long Island.