Kremer’s Corner: LIPA vs. PSEG no winners

Jerry Kremer

The number of federal and state agencies that run our lives is endless.

At the federal level, there is the IRS, CIA, CDC, HHS, DOI, FDA, FBI, DOT, DOE, FERC, and dozens more.

Here on Long Island the two most prominent public organizations are LIPA and PSEG.

LIPA as we have come to know it is the Long Island Power Authority and PSEG is Public Service Electric and Gas. Everybody who uses electricity should pay attention to what these two entities are doing as they are in the middle of a World War type utility battle.

LIPA has been around since 1985 when it was created by the state Legislature. PSEG has been in existence since 1906 and its Long Island operation has been under contract to run the local electric system for the past six years.

The dispute between these two companies dates back to early August 2020 when Hurricane Isaias hit Long Island. That Category 1 hurricane hit the island hard causing 645,000 homeowners to lose power.

In the days following the hurricane, PSEG was criticized for failing to restore power quickly enough and elected officials of both parties were quick to bash PSEG for its slow response. LIPA officials complained bitterly about the breakdown in service. Gov. Cuomo jumped into the fray and threatened to take away the company’s contract and its ability to do business in New York State. It took many days to get all of the customers back online, which added to the outrage.

PSEG’s response to the crisis came in the form of an apology from the company’s top officials who promised to “do a better job in the future”.

LIPA made an extensive series of recommendations on how service had to be improved, with the veiled threat that it would cancel the PSEG contract and possibly take over the electric system itself.

The two sides are engaged in a back and forth hassles accusing each other of a variety of actions that have slowed down the process. LIPA has sent PSEG over 100 demands for program changes and PSEG in turn is accusing LIPA of bad faith.

PSEG argues that it has a six-year record of providing good service and LIPA is focused on the delay in getting responses to its demands. It is possible that the two companies will need a mediator to resolve their dispute, but the idea of LIPA again running the system is a subject that needs intense discussion.

There is no doubt that LIPA is currently being run by a group of talented officials who have great credentials in the energy industry. But a look at the history books shows that LIPA has been the operator of the system before and it didn’t have a happy ending.

To begin with, LIPA was born because Long Island ratepayers were disgusted with the old LILCO. LILCO had a bad attitude dealing with its customers and was saddled with the costs of a $6 billion nuclear power plant.

I am somewhat of an expert on the reasons for the birth of LIPA as I was a member of the state Assembly when we voted to form LIPA. With the encouragement of Governors Mario Cuomo and George Pataki, LIPA was born and it sold a massive bond issue, the proceeds of which were used to buy out LILCO shareholders.

LIPA bought LILCO in 1998, after LILCO had decided to close its Shoreham plant. For a number of years, LIPA ran the administrative operation, but KeySpan ran the electric and gas system.

In 2012, Hurricane Sandy hit Long Island with a vengeance destroying billions in property and creating havoc that took years to correct. LIPA was not prepared for a storm of that magnitude and it took heavy criticism for things like not having enough utility poles to replace downed poles.

At that point in time, Governor Cuomo decided it was time to get LIPA out of the electric power business and solicited bids. The state had a choice between PSEG and Con Edison. PSEG had a respected national network and was considered a better choice.

For the record, I have represented both LIPA and PSEG at one time and am not at this time involved with either. I am hopeful that the two giants find a way to bridge their differences because in my opinion, a 100 percent public operation could be a major mistake.

About the author

Jerry Kremer

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