From today in Crain’s New York Business, (may be behind a pay wall) the headline “LIPA to require state bailout.” LIPA would be the Long Island Power Authority, purveyor of the highest-priced electricity in the lower 48. I like the term “require,” like there’s nothing we can do about it. It’s just a law of nature!
In fact what we have going on is serious wealth destruction, $7 billion or so, by a succession of New York governors, Democrats Cuomo pere et fils, as well as the intervening Republican Pataki. (What, we can’t blame this one on Spitzer? Surprisingly, no; although if he had gotten a chance to weigh in on it he clearly would have gotten it wrong.)
It seems that Gov. Andrew Cuomo, in his recent State of the State address, proposed to “abolish” LIPA.
“It has never worked,” he said. “It never will.” But analysts believe that persuading a private company to buy the much-maligned utility would require the state to assume at least $4 billion of LIPA's $7 billion in debt. A sale would then trigger nearly $1billion in additional costs: early-termination fees paid to bondholders, as well as penalties for the derivatives contracts that would suddenly become void, according to people who have studied a privatization.
Who could have seen it coming that LIPA would never work? Just a brief review of the history (more detail in my previous post here and at Wikipedia here): From about 1973 to 1985, Long Island’s then-private utility LILCO built a nuclear power plant at Shoreham at a cost of about $6 billion. When it was fully built and ready to operate, then new Governor Mario Cuomo, bowing to strongly expressed nuclear fears of the Long Islanders, decided to block the opening by refusing to cooperate in the development of an emergency evacuation plan. The opening was blocked, and now Long Island had spent $6 billion with no electricity to show for it. That $6 billion (plus some accumulated interest) is the hole we are still trying to deal with. Cuomo pere came up with the idea of transferring much of the cost of the plant to other New York taxpayers, and to Federal taxpayers, by creating a “public” utility for Long Island that could issue tax exempt bonds. That would be LIPA. Of course, they didn’t have the people actually to run a complex utility, so LIPA was set up as the thinnest of possible shams to claim the tax exemption – nothing but a board of directors with all the real work subcontracted to private utility operators. It took until 1998, in the administration of Pataki, to finally get LIPA up and running and all the debt refinanced into tax exempt bonds.
But even though the interest rates were somewhat lowered, Long Island still had the now $7 billion of debt and also had to buy its electricity elsewhere. Not hard to see why it has the highest electric rates in the country. It also had a utility consisting of nothing but a political board with no idea how to produce or deliver electricity, and a mission to come up with electricity free both from all risks and all costs. Not possible. They pretended to solve that by skimping on maintenance. Then came Hurricane Sandy. The next-to-no maintenance thing didn’t work out so well.
Meanwhile, how dangerous is nuclear power really? The worst recent nuclear accident is the one at Fukushima, Japan in 2011. How many people died from radiation as a result of that? Believe it or not, not a single death there has been definitively attributed to radiation so far, although an unknown number of cases of cancer could develop in the future. Here is the Wikipedia entry:
A few of the plant's workers were severely injured or killed by the disaster conditions (drowning, falling equipment damage etc.) resulting from the earthquake. There were no immediate deaths due to direct radiation exposures, but at least six workers have exceeded lifetime legal limits for radiation and more than 300 have received significant radiation doses. Predicted future cancer deaths due to accumulated radiation exposures in the population living near Fukushima have ranged from none to 100.
Meanwhile we accept tens of thousands of deaths per year from automobile accidents without complaint and, indeed, barely noticing it. Also, the people of Westchester accept (reluctantly) the risk of the Indian Point nuclear plant, that supplies about 25% of the electricity for New York City. Our current Governor also is trying to close that one down. Oh, and he continues a hold on drilling for natural gas within the state by the “fracking” method. So what exactly is the method of producing electricity that he and his supporters will allow?
You will not be surprised that I do not have a lot of sympathy for the Long Islanders here (who let their way overblown fears get the better of them and now would like others to pay the cost), nor for the Governors who go along with and indeed lead this vast wealth destruction. Sorry, but this is not the problem of the rest of the New York taxpayers, let alone the Federal ones.
Here’s a picture (from 2010) of the Shoreham power plant, still sitting there idle after all these years.