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New York Post


Call it 'LIPAsuction'

November 19, 2012

By Nicole Gelinas

Blame pols for power woes

Last week, Gov. Cuomo named a commission to figure out what went wrong with New York’s power grid to make post-Sandy recovery so torturous. With the Long Island Power Authority, the commission should focus less on what Cuomo called a "dysfunctional utility system," and more on the state’s dysfunctional political system. Pols from Govs. Mario Cuomo to George Pataki, and plenty in between, crippled LIPA.

Sandy knocked out power to 2 million customers in New York. But one week after the storm passed, Con Ed had restored power to 88 percent of its people in the dark; LIPA, just 77 percent.

Why did LIPA lag?

Never mind burying power lines or building computer systems that can handle a large volume of outage calls. Pre-Sandy, LIPA was behind on pruning trees.

If LIPA were a private firm, like Con Ed, Cuomo could yank its license and get a new company in. But LIPA is a public authority, created by Cuomo’sfathermore than a quarter-century ago.

Since then, pols have hidden the financial costs of politics as usual — billions of dollars’ worth of debt — on LIPA’s books, then made Long Island and Queens power customers pay for that, instead of a better grid.

LIPA first came in handy when the pols decided to bail out the bondholders and shareholders of Lilco, Long Island’s old, private power firm, rather than let it go bankrupt after it had built a nuclear power plant that the state wouldn’t let it open.

That decision, set in motion in the ’80s but not finished until the ’90s, saddled LIPA with $6.7 billion in debt, including $4.2 billion in an "acquisition adjustment" — that is, moneyabovewhat Lilco was worth.

Why bail out Lilco?

Partly because the state needed a way to pay off Lilco after having long abused it as a cash cow to fund Long Island’s chronic budget deficits.

Until the mid-’90s, Suffolk County and other local entities overcharged first Lilco, then LIPA, on property taxes. Lilco sued and won — and local governments should have had to pay the utility back $1.4 billion. But Long Island’s always-broke governments had alreadyspentthat money (on six-figure public-employee salaries and pensions).

So after LIPA finished buying Lilco, Gov. Pataki, who controlled LIPA, forced it to settle for half what it was owed. Even then, the local governments didn’t payit — instead, LIPA raised yet more debt to get the money it was due.

Ratepayers are paying that debt back, too.

At the time, LIPA Chairman Richard Kessel, an old Cuomo-Pataki hand, said the settlement would help LIPA begin "the new millennium with a clean slate." Then-Suffolk County Executive Robert Gaffney claimed the deal would prevent "massive tax increases."And Pataki called it the realization of his "historic plan" for Long Island: "lower electric bills" while "avoiding massive property tax hikes."

No, now the plan has been realized — with blackouts.

It would’ve been nice if some of the money the pols took from LIPA to solve theirownproblems had gone instead for electricity. But because LIPA has borrowed for political reasons, it can’t borrow as much to build or improve power lines.

Let’s see if Cuomo’s investigators use their subpoena power to troll through this history and indict the system.

Probably not.

For one thing, the governor is blatantly pointing them in the wrong direction. Every time someone mentions LIPA, Cuomo says "National Grid." As he told reporters last week when one asked him if he took responsibility,"The provider there is National Grid the way the provider [in the city] is Con Ed."

Yes, LIPA has hired National Gridto do the power, since that is actual work that LIPA hacks don’t know how to do. But National Grid doesn’t set investment or debt policy. The company makes an easy scapegoat, though, since it’s leaving anyway; PSEG is taking over in a year.

Another sign: Facing a slew of vacancies on LIPA’s board, theoneguy Cuomo has named to it, Peter Tully, is a construction magnate who has donated truckloads of cash to Cuomo and to Long Island and Queens Democratic machines.

Nothing wrong with that, but someone whose business requires keeping pols happy is unlikely to speak up for ratepayers against the rest of the state.

Plus, the investigatorsthemselveshail from the same power, construction and political worlds, and have done OK with things just the way they are.

So expect a lot of talk about capital investment — and little talk about where the money that could havepaidfor such investment went.

Original Source:



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