NY State to privatize Long Island utility, freeze rates -Gov Cuomo

NEW YORK, June 19 Wed Jun 19, 2013 6:33pm EDT

NEW YORK, June 19 (Reuters) - New York lawmakers announced a deal on Wednesday to privatize utility operations on Long Island and revamp the Long Island Power Authority, a state-owned New York utility company that was criticized for its response during last year's Superstorm Sandy.

The deal, announced by Governor Andrew Cuomo, includes a rate freeze through 2015.

Public Service Enterprise Group Inc, a private utility in neighboring New Jersey, will take over management of LIPA's operations. Lawmakers faulted a bifurcated system where operations were partly run through a services agreement with power company National Grid Plc.

"For years, LIPA has provided lackluster service while asking ratepayers to foot the bill for its financial problems. LIPA's failure during Superstorm Sandy was a wakeup call for action," Cuomo said in announcing the deal with the majority leaders of both houses of the state legislature.

After Sandy slammed into the northeastern tip of the United States last October, more than 90 percent of the 1.1 million LIPA customers on Long Island were left without power, some for more than two weeks.

LIPA's services agreement with National Grid is due to expire at the end of 2013. PSE&G was already set to take over as the system's operator but the governor's proposal will see that role expanded to take over most of the company's operations.

PSE&G will assume full authority over the utility's day-to-day operations including budgeting, maintenance, storm preparedness and response and infrastructure improvements.

LIPA will in effect be reduced to a holding company with a significantly reduced staff, which will allow the state to maintain its eligibility for FEMA and tax benefits.

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