Although this information was carefully researched, we did rely on the veracity of our sources, so there may be inaccuracies beyond our control.
The following questions are addressed:
Isn't PSEG Long Island the electric utility?
Aren't you promoting a "government takeover"?
If it is not a government takeover, what are you promoting?
Why isn't "privatization" being considered?
Is it a done deal that LIPA will take over running the electric grid itself?
Who stands to gain from a ratepayer-centric model, and who will "lose"?
Is a public utility a new idea?
How will a public LIPA better address shortcomings than the public-private model?
What are the benefits of a public utility?
Your proposed plan includes an Energy Observatory. What is that?
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Isn't PSEG Long Island the electric utility?
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No. PSEG Long Island bills customers and operates and maintains the electric grid on Long Island and in the Rockaways under contract with the Long Island Power Authority (LIPA), the owner of the grid. This is a public-private model. The first contract was with KeySpan (later bought by National Grid) and after Superstorm Sandy the contract went to PSEG. Both partnerships have proven to be expensive and unreliable compared to both public and private utilities.
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Aren't you promoting a "government takeover"?
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No. It's not a takeover, it's a take back. The takeover by a new state public authority happened in 1998 when LIPA acquired the assets and $7.3 billion debt ($4.6 billion from the Shoreham Nuclear Power Plant fiasco) of the now-defunct Long Island Lighting Company (LILCO). See the Long Island Electric System Timeline for more information..
Although LIPA was created in 1986 as a not-for-profit public electric authority in order to take over the grid and its debts from the failing LILCO, it took 12 years to come to fruition. The takeover was necessary to keep the electric utility functioning, or the lights would have gone out on Long Island and the Rockaways.
Once LIPA assumed ownership the operation and maintenance of the electric grid was contracted out to a third party, KeySpan. This was necessary because all the LILCO workers were assigned to KeySpan, the company that took over the gas portion of LILCO's business. There were no trained workers assigned to maintain LIPA's electric grid. This is the public-private model we have today. It has proven to be an abject failure, so Reimagine LIPA is recommending the existing public authority, LIPA, should manage 100% of the electric system. It's time to take back our power!
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If it is not a government takeover, what are you promoting?
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The Reimagine LIPA campaign recommends that LIPA take back 100% responsibility for the electric grid it owns. It will have an accountable and representative multi-stakeholder Board of Trustees where local voices help determine the composition by appointment. Right now all appointments to the LIPA Board are made by the governor and elected state officials with no meaningful input from local communities.
We also recommend a new Community Board, made up of representatives from diverse sectors and backgrounds with proper geographic representation. It would play a leading role in engaging communities across the service territory in determining rate structure, accessing energy programs, implementing renewable energy projects, providing support during outrages and other emergencies, and developing initiatives to help the utility realize its mission.
It would not have to rely on a third-party utility to run our electrical system. LIPA would reclaim its accountability, control, and responsibility for all aspects of the electric grid by ending the outsourcing to private utilities. Eliminating this saves about $80-$100 million annually in management fees and affiliate expenses!
Reimagine LIPA recommends a total restructuring of LIPA in order to run the grid effectively with a customer-centric focus. Instead of a governor-appointed board, most or all of the board members would be locally appointed. This way the authority would be guided by those most affected by decisions concerning our energy system.
LIPA's mission would be modified to include climate justice, energy democracy, equity, and greater participation by its customers. This would codify LIPA's commitment to a new paradigm of energy management in its service area. Here is more detailed information about Reimagine LIPA's Proposals.
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Why isn't "privatization" being considered?
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We've been there and done that. Privatization is not being considered because the original private utility, the Long Island Lighting Company (LILCO), owned and operated the electric grid. There were many problems with this company, including fiscal mismanagement that almost led to bankruptcy a few times and ended with avoiding actual bankruptcy when the not-for-profit Long Island Power Authority was created to take on LILCO's debt. Only $4.5 billion of the $7.3 billion debt was due to the Shoreham nuclear power plant fiasco.
When LILCO's debt was taken over by LIPA in 1986, it was able to refinance the debt at a lower interest rate. The charter that set up LIPA as a public authority stipulated it would not be regulated by the Public Service Commission (PSC), which regulates all the private utilities in New York State. Instead it is overseen by the Long Island division (DPS-LI) of the Department of Public Service of which the PSC is a part.This allows LIPA to borrow money at low interest rates via municipal bonds.
Privatization now would also be more expensive. Returning to privatization would automatically require the refinancing of the current LIPA debt of $10 billion at a higher interest rate that would cause rate hikes. In addition, a private company would need to charge ratepayers more in order to make a profit and pay taxes. It would also answer to stockholders more than ratepayers.
Private utilities are also ineligible to receive Federal Emergency Management (FEMA) funds, while LIPA is and has already received and utilized FEMA grants to harden our electric grid. This is a lose, lose, lose proposition. Privatizing our electric system would have all harms and no benefits.
However, based on previous studies, such as the Moreland Report and LIPA's 2021 Options Study, a fully public LIPA operating all aspects of the electric system is the best way to go for the ratepayer.
- Is it a done deal that LIPA will take over running the electric grid itself?
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Actually, a fully public LIPA is not a done deal. While the Legislative Commission on the Future of LIPA is responsible for developing legislation to create a fully public utility, that legislation will still need to be passed by the NYS Assembly and Senate, and signed by the Governor.
We already had a private electric utility—LILCO, the Long Island Lighting Company— that was happy and relieved to let a public corporation be established to take over the electric grid and its enormous debt of $7.3 billion at the time.
LILCO was expensive, catered to its stockholders—not its customers—and failed as a business. LIPA bailed it out of deep debt—$7.3 billion dollars’ worth—that otherwise would have bankrupted the company.
Three previous studies by LIPA, comparing the existing public-private model, full privatization and fully public systems, indicated customers would be better off with a fully public electric utility. This was confirmed in the newly released Draft Report issued by the LIPA Commission.
Privatization would also be more expensive. Private corporations pay income taxes that are passed on to the customers. LIPA is non-profit and pays no taxes.
Private utilities are not eligible to receive Federal Emergency Management (FEMA) funds. LIPA, as a nonprofit corporation, is eligible.
Private investor-owned utilities issue higher-interest stocks. Public authorities, such as LIPA, use no state tax dollars and incur no state debt. Instead, they issue low-interest bonds to raise money.
Either way, that interest payment is included in the ratepayer bill. Our electric rates are already as high as investor-owned utilities. With full privatization our rates will be higher.
Considering all these factors, a fully public LIPA is the best and least expensive way to move into the future.
- Who stands to gain from a ratepayer-centric model, and who will "lose"?
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LIPA customers stand to gain the most from this restructuring. PSEG stands to lose the most, which is why its industry organization, the Edison Electric Institute, has spent thousands or more dollars on advertising to spread misleading information about this campaign and the purpose of the LIPA Commission. Edison's intent is to overturn the commission process so PSEG can continue to be the private partner beyond its current contract that expires in 2025.
- Is a public electric utility a new idea?
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No. There are several municipally owned and co-op-owned electric utilities in the US.
Founded in 1940, the American Public Power Association is the voice of not-for-profit, community-owned utilities that power 2,000 towns and cities nationwide, serving more than 49 million customers and 96,000 employees. LIPA is a member of this association.
The National Rural Electric Cooperative Association (NRECA), founded around 1947, is the trade association of electric co-ops that service mostly rural areas. America’s electric cooperatives are energy providers and engines of economic growth for 42 million Americans.
- How will a public LIPA better address shortcomings than the public private model?
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Better accountability: The buck will stop with LIPA when it fully manages the utility. Since Long Island and the Rockaways are its only service area, LIPA can focus on it and its needs exclusively. Customers will address their concerns only to LIPA and the Board of Trustees, which will have to answer only to the public it serves, not stockholders. With the changes to selecting the Board that are being developed by the Legislative Commission, we expect there will be more open lines of communication between the public and Board Members. When customers report on programs that don’t work well, they can be changed to fulfill their purpose and better serve the public.
Better responsiveness: Right now, even when callers contact LIPA directly to report a problem, LIPA cannot do anything but relay the information to PSEG and wait for it to respond. With LIPA running the grid they will be able to respond to their ratepayers.
Better maintenance: When KeySpan operated the grid they did little work to trim trees to protect the overhead electric lines. PSEG has been better about protecting infrastructure, but how a private company partner invests in a more reliable grid is up to them. When LIPA is in charge, it will determine how and when to harden the grid.
Better communication: If you've ever played the game “Telephone” as a child, you know how garbled the message can get from start to finish. This is the same problem LIPA has with PSEG and previous public-private partners. If LIPA wants to make a change or detects a problem the communication has to go through LIPA and then be sent to PSEG. Valuable time is lost because the middleman slows the process. By being fully responsible for the execution of needed upgrades and solutions, LIPA can directly and quickly deal with any necessary updates, corrections, or changes.
Improved public outreach and participation: The Reimagine LIPA campaign is promoting the idea of an “Energy Observatory” that is independent of both the utility and the government. The Energy Observatory would coordinate the needs of the utility with the needs of the community. Part of the purpose of the Energy Observatory proposed by the Reimagine LIPA campaign is to maintain a connection with the public. It can engage stakeholders before programs are designed and released to ensure the public understands and is able to access them.
Better research: Another purpose of the Energy Observatory is to conduct even-handed research, both through reviewing existing studies and launching new independent ones on relevant topics. This way the Observatory can teach and demonstrate the best practices followed elsewhere and perhaps even improve upon them. Unbiased research leads to better decisions, policies, and programs.
More funds to invest: Rather than sending profits to overpaid executives and stockholders, excess revenue would be directed towards paying down the debt, hardening the grid against the weather, building and/or incentivizing more renewables, and/or lowering electric rates.
- What are the benefits of a public utility?
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Investor-owned utilities (IOUs), including PSEG LI, are managed to provide profits for shareholders. A consumer-owned utility (COU), as we envisage LIPA becoming, is owned and controlled by those who use the electric system. It is managed for the benefit of its customers, not for profit, dividends, or stockholders.
A public utility gives back. A 2016 study shows that public power contributes 27% higher contributions to the locality than private utilities.
The benefits stay local. Private utilities benefit their stockholders and the state or country in which they are based. National Grid is a UK company; PSEG is a New Jersey company. Public power keeps the money in the LIPA service area and can support the creation of good, local jobs in it.
It gives the community a voice. As a public entity, there are more opportunities to incorporate tough accountability mechanisms.
It supports the energy future. All utilities that have achieved 100% renewable energy goals have one thing in common: they are publicly owned.
- Your proposed plan includes an Energy Observatory. What is that?
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The Energy Observatory will be an independent institution to monitor and advise the utility, engage ratepayers, do independent research, and support ratepayers and communities in their own efforts to obtain renewable, affordable, and reliable energy. It would create a vehicle for two-way communication between the utility and public, hold the Board accountable, and itself be accountable to the public. This would enhance LIPA's ability to make the renewable energy transition happen quickly, justly, and orderly. Much of this is beyond the DPS-LI's mandate and yet these activities would enhance LIPA's effectiveness. For more details see our Reimagine LIPA proposal under the heading "Energy Observatory."