Governor Cuomo and LIPA

More than two weeks after the big storm, the lights are still out in big parts of Long Island.  Their utility out there is called LIPA -- the Long Island Power Authority, a New York State agency.  Not only has LIPA done a poor job of getting the power back on, but they are famous for having about the highest rates in the country, except for some remote places in Alaska and Hawaii.

Our Governor Andrew Cuomo has called for an investigation of the performance of the various utilities, and particularly LIPA.  He has appointed a commission to "investigate."  How could their rates be so high and their performance at the same time so bad?

Well, it's not too hard to figure out. There's a rather good summary on Wikipedia.

In the 1990s and before, Long Island had a utility called Long Island Lighting Company, LILCO. LILCO was private, not a state agency.  In the 70s and 80s LILCO got the idea to build a nuclear power plant at Shoreham on the North  Shore of Long Island.  They got a Federal permit and went out and built it, at a cost of about $6 billion.

By the time the plant was completed in about 1984, the post-Three Mile Island nuclear scare was in full swing. To open the plant, LILCO needed the participation of Suffolk County and New York State in just one thing -- an emergency evacuation plan.  Both flatly refused to cooperate. The then Governor, also Cuomo (first name Mario - father of the current Governor) ordered state officials not to  approve any plan.  (Full disclosure:  the elder Cuomo is Of Counsel at my law firm.)  LILCO gave up, and was left with a fully-completed, functional nuclear power plant that it could not open. 

The elder Cuomo came up with a plan to have a state agency, LIPA,take over LILCO and close down Shoreham.  Basically, LIPA would issue tax-exempt bonds to take out the LILCO debt on the power plant.  Those bonds would bear a lower interest rate because of their tax-exempt status.  Essentially, close to half the cost of the plant would be put to the Federal government through the tax exemption on the bonds, but the rest would be left to the Long Island ratepayers, even though they had no usable facility to show for the money.  The Republican congress of the 90s set out to stop this by making bonds issued to finance takeovers of utilities ineligible for tax exemption, but in congressional horse trading, New York got the LILCO takeover excluded.

The LIPA takeover of LILCO was not completed until the late 90s, by which time the elder Cuomo was out of office.  But I think he would be pleased to take credit for the result.

And the result is, LIPA ratepayers have to pay not only for the facilities that provide their electricity, but also for an entire nuclear power plant, fully built and discarded.  I'm sure there are other factors, but is it then any surprise that the Long Island ratepayers have about the highest rates in the country, and at the same time LIPA is always squeezed for funds and skimps on maintenance?

And by the way, since LIPA is a state agency, who is responsible for it?  The Governor is not the CEO, but he does appoint most of the Board.  So, Governor Cuomo, exactly who is the commission going to investigate?  I guess not you, because you appointed the commission and they know better.