* Sandy left more than 8.5 million without power in Northeast
* NY and NJ still have more than 1 million customers out each
* Some may have to wait a week before power restored
Nov 2 (Reuters) - U.S. utilities restored power on Friday to about a million East Coast homes and businesses plunged into darkness by Hurricane Sandy, a slowdown from the past two days, as crews began to work on the hardest-hit areas that may take days to fix.
About 3.5 million customers remained without power as of Friday afternoon, according to U.S. Department of Energy figures based on utility reports. The 1 million customers restored on Friday was down from the 2.1 million who had power restored on Wednesday and the 1.6 million on Thursday, the data showed.
Utilities say they typically look to restore power to the biggest blocks of customers first, then tackle more difficult, isolated problems. They have warned it could yet be another week before all the lights are back on.
That utilitarian approach may still frustrate homeowners, as well as motorists who must wait hours to fill their tanks with two-thirds of area filling stations lacking power.
More than 1.2 million homes and businesses in New York and 1.4 million in New Jersey remained without power on Friday, including many of the dozens of oil terminals along the harbor that are critical links in the fuel supply chain. Some operators had brought in generators to resume flows.
FirstEnergy Corp, the holding company hardest hit by the storm, has restored power to 82 percent of the outages in Pennsylvania, Ohio, West Virginia and Maryland, where wind and rain was the primary cause of outages.
But in New Jersey, where a direct hit from the massive storm inflicted catastrophic damage across the state, FirstEnergy said flood waters and substantial debris were still impeding restoration efforts in many areas. More than 710,400 of its 1.2 million customers in the state were still without power, down from more than 1 million affected by the storm.
"Customers in the hardest-hit areas can expect to be restored throughout the following week," FirstEnergy's Jersey Central Power and Light (JCP&L) said. "A significant number of customers will not be able to receive service until damaged roads, infrastructure and homes are rebuilt."
The total number of customers affected by Sandy was 8.5 million, slightly more than following Hurricane Irene in August of last year. But the damage from Sandy is much harder to fix.
By the fifth day following Irene, 6.7 million or 80 percent of the outages has been remedied. For Sandy, however, only 59 percent of power had been restored by Friday.
For a FACTBOX on power supplies see:
In this storm, utilities in New York and New Jersey said the devastating damage was not caused by wind and rain but by record storm surge that flooded coastal communities.
Most utility companies in the two states said it could take a week or longer to restore power to all customers.
CUOMO THREATENS UTILITIES
In New York, Governor Andrew Cuomo sent a letter Thursday to the CEOs of state power companies, saying he would "take appropriate action" if utilities fail their duties.
"I recognize there are men and women in the field now working hard to restore service ... but it is your job to provide them with adequate resources and support to get the job done in a timely and safe manner," Cuomo said.
"When (utilities) fail to keep the public's trust, they must answer," the governor said, threatening to commence efforts to revoke operating licenses if any are found wanting.
New York power company Consolidated Edison Inc said it has brought in crews from as far as California to help with what the company said is the worst natural disaster in the company's 180 year history.
The company said Friday afternoon it repaired a key 14th Street substation whose spectacular explosion on Monday evening knocked out much of lower and mid-Manhattan on Monday evening. It has promised to have power restored by Saturday.
The 249th Engineer Battalion is moving a 13-megawatt power "package" in from Fort Belvoir in Virginia that will be hooked up to the Con Edison grid. That generating package can provide enough power for around 42,000 New Yorkers or 70 medium-sized apartment buildings, according to Reuters calculations.
The company said on Friday about 561,900 homes and businesses in New York City and Westchester County were without power, down from more than 900,000 affected by the storm.
Con Edison, which serves more than 3 million customers in all, does not report outages by region often but in its last report at 5:00 a.m. EDT (0900 GMT) Friday, the company said about 226,000 customers lacked service in Manhattan, 84,000 in Queens, 35,000 in Brooklyn, 54,000 in Staten Island, 31,000 in the Bronx and 140,000 in Westchester.
In New Jersey, Public Service Enterprise Group Inc, the biggest power company in the Garden State, said 692,000 customers were still out, down from 1.7 million. PSEG serves about 2.2 million customers in the state.
Before restoring service, PSEG said workers had to wait for the flood waters to recede, dry out the equipment and replace equipment when necessary.
"This is a painstaking process," PSEG said in a release.
Elsewhere in New York, the state-owned Long Island Power Authority (LIPA) -- which has been among the most heavily criticized for its response to the storm -- said it still had about 529,800 customers still without power, down from more than 900,000. LIPA serves about 1.1 million customers on Long Island.
"With respect to the Long Island Power Authority, I will make every change necessary to ensure it lives up to its public responsibility," Cuomo said.
"It goes without saying that such failures would warrant the removal of the management responsible for such colossal misjudgments," Cuomo said about LIPA.
UK power company National Grid operates the power system on Long Island under a contract with LIPA. That contract will end in 2014, when a unit of New Jersey's PSEG will take over the operation of the system.
"We understand and share the governor's concern for the citizens of New York, and that is our sole focus until every customer is restored," National Grid said in response to Cuomo's letter.
The utilities in New York and New Jersey with much fewer current outages include units of Con Edison, Iberdrola SA , National Grid, CH Energy Group Inc and Pepco Holdings Inc.