A prescription for Long Island: fixing the sins of privately owned utility operators with more privatization

Rockville Centre, one of the three villages that owns and operates its own electric utility on Long Island, by contrast, is both regulated by the PSC and accountable to village board of trustees. According to Pallas, the Rockville Centre Electric Department superintendent, “my customers have a direct line to me and the village board and I think that is a big incentive” for providing reliable service. He told Remapping Debate, for example, that 60 percent of the village lost power. While very substantial, that was far less than the 90 percent of LIPA customers overall who lost power. And, Pallas said, the village was able to restore all its distribution lines after seven days — much quicker than many parts of the LIPA service area.

The Moreland Commission argued that fully public utilities would have difficulty creating compensation structures that would either reward “improvements in efficient operation and customer service” or attract top candidates for employment (although it did acknowledge that incentive compensation structures do exist in public utilities outside of New York).

Does this mean that publicly owned utilities will invariably have problems? Tyson Slocum thought not: “To argue that municipally-run systems will be inherently prone to not investing in the future is just a preposterous argument that flies in the face of real-world experiences with some municipal utilities in the United States.” Though public power is not a guarantee of being the best system, he added, “[it] is like saying that, well, the cities of Los Angeles, Austin, Texas, Seattle, and Sacramento, they all should have frequent blackouts by now.”

Farrell concurred: “The fact that municipal utilities can…be competitive with private companies even though most of them are tiny, certainly puts the lie to that idea that you need a big utility in order to get to those values of affordable and reliable, plus you have the benefit of being accountable when you are local.”

A mixed record on sustainability

On sustainability, public power agencies have a mixed record, said Farrell, noting that there is a “long history” of rural cooperatives and municipally-owned electric utilities “looking to buy coal power at the cheapest possible price.” At the same time, however, recent successful efforts at creating a public power entity in Boulder, Colorado, have been motivated by the desire of residents to receive more renewable power.

Sharon Beder, the author of “Power Play,” argued that “if government is making the decision about sourcing energy or what sort of plant the next [one] will be…it can put sustainability in as part of its decision making process, and it can just do it.” By contrast, she said investor-owned utilities tend to encourage renewable energy development through “market instruments,” a process that she described as “very indirect” because it is not integral to the mission of the utility.

Having your cake and eating it too

Since launching the Moreland Commission and declaring his support for privatization in his State of the State address, Gov. Cuomo has encountered some skepticism from Long Island politicians and residents who argue that privatization is likely to bring higher rates to the Island and may not resolve the service issues that residents have faced at the hands of LILCO and LIPA.

Matt Cordaro, the Suffolk County LIPA Oversight Committee co-chair, had a suggestion for the governor, though. Cuomo sees privatization “as the fastest way to cut the cord and get out,” Cordaro said, but “he should know that there is a better way of doing that.” Making LIPA fully public and run by Nassau and Suffolk counties “is feasible and possible and very easy to accomplish,” and it allows Gov. Cuomo to get the state out of the electricity distribution business.

“I claim he can have his cake and eat it too.”