* Over 200,000 still without power on Long Island
* PSEG to take over operation of LIPA system in 2014
* Moody's warns about LIPA's cash position
* Requests for LIPA emergency plans went unanswered
By Scott DiSavino and Cezary Podkul
NEW YORK, Nov 6 The people in the coastal
communities of Long Island and Queens in New York were among the
hardest hit by Superstorm Sandy. Now they are suffering new
blows because of the inability of their power utility to restore
A Reuters analysis of power outage data shows the Long
Island Power Authority (LIPA) has the biggest share of affected
customers still without power among New York utilities.
The 200,000 LIPA customers still without electricity
accounted for more than half of the 370,000 New York utility
customers still without power as of Tuesday morning, Reuters
With a largely above-ground power network exposed to the
full fury of Sandy's fierce winds and 14-foot storm surge, more
than 90 percent of LIPA's 1.1 million customers lost their
power, the biggest impact on any area power company.
The recovery has been so slow that New York Governor Andrew
Cuomo has criticized the performance of all of the power
companies affected by Sandy, especially LIPA, whose management
he has threatened to replace.
But the performance of state-run LIPA was already under fire
from local legislators long before Cuomo threatened to sweep
In March of last year, an oversight committee in New York's
Suffolk County raised warnings about the utility's preparedness
and operating structure - a unique model under which LIPA is
essentially just a shell, outsourcing its grid operations to
In particular, the committee members feared that LIPA's
emergency preparedness manuals were outdated and that the
outsourced structure made accountability difficult.
These concerns, voiced by the county's LIPA Legislative
Oversight Committee, now lie at the heart of the utility's
ability to carry on with business as usual.
Sheldon Sackstein, co-chair of the Suffolk County committee
and a former trustee of LIPA, asked at least twice last year to
view the utility's emergency preparedness manuals to make sure
they were up to date. Eighteen months later, he has yet to
receive a response. He fears what he would find.
"They weren't ready," he said in an interview on Monday.
The bad news piled up. Moody's Investors Service warned on
Monday that LIPA could come dangerously close to running out of
cash in coming weeks if it does not shore up its balance sheet.
It has yet to receive the full $100 million reimbursement it is
expecting from FEMA for last year's Hurricane Irene, Moody's
noted, with Sandy restoration costs now mounting.
The turmoil comes at a delicate moment for LIPA, one of the
country's largest government-owned utilities but with a staff of
just around 100 employees.
UK-based National Grid PLC, which has been running
LIPA's transmission and distribution system since buying
original operator Keystone in 2007, is set to hand operations
over to a unit of New Jersey power company Public Service
Enterprise Group Inc in 2014.
National Grid spokesman Steve Brady said in a statement to
Reuters that "the emergency (preparedness) plans are LIPA's; we
implement them. We believe the plan is solid, and we are
implementing it to the fullest."
LIPA did not respond to repeated requests for comment.
PSEG declined to comment on the effects of Sandy on the
handover of operations but said it is "still on track" to take
over LIPA's system in 2014. Transition planning is well under
way, PSEG said.
It is not clear what impact, if any, the storm and its
aftermath will have on the switch. But it is likely that PSEG
will have some work to do to win back the support and trust of
local residents and state, county and village leaders.
A week after Hurricane Sandy made landfall, about 20 percent
of LIPA's affected customers are still without power, according
to the Reuters review.
By comparison, Consolidated Edison Inc, which serves
most of New York City and Westchester County, has restored power
to all but 12 percent of the roughly 1 million customers that
Only FirstEnergy Corp's JCP&L utility in New Jersey
had a higher share of customers without power as of Tuesday, at
26 percent. Of the 21 states affected by Sandy, New Jersey
suffered the most damage.
LIPA's operator, National Grid, also owns and operates
electric utilities in upstate New York, Massachusetts and Rhode
Island, where it restored power to almost all customers within a
week. Those areas were hit primarily by Hurricane Sandy's high
wind and rain, not the storm surge that pummeled Long Island.
But even prior to the hurricane, dissatisfaction with LIPA's
outsourced structure was mounting. Last October National Grid
lost the operating contract for LIPA to PSEG.
"This deal (with PSEG) will ... improve services and
communications with a company right across the river in New
Jersey - not with a company headquartered (in Britain) 3,500
miles across the ocean," LIPA Chairman Howard Steinberg said
when the utility announced last October that PSEG had won the
The PSEG deal came just a few months after Hurricane Irene
left about 523,000 LIPA customers without service, some for as
long as a week. LIPA's chief operating officer, Michael Hervey,
said last October the pace of restoration during Hurricane Irene
did not drive the utility to replace National Grid with PSEG.
Over the past few years, LIPA managers have considered
several alternatives to the outsourcing arrangement: operating
its electric system itself; selling the operations to another
power company, or continuing to contract with another firm.
LIPA decided to stick with using an outside company because
it was the most cost effective option for ratepayers.
Sackstein disagreed with the decision.
"It has always been my fondest desire to see (LIPA) staff up
with utility people who would then be in a position to direct
the labor force without an intermediary," he said.
Cuomo has not said who might replace existing LIPA
management. But as recently as September he said the New York
Power Authority (NYPA) could play a role in operating the
NYPA is a state-owned generating company that sells power to
upstate New York companies to encourage the creation and
preservation of jobs. NYPA also sells power to government
customers in New York City, including the city's hospitals,
schools, subways, government offices and commuter trains serving
the metro area.
LIPA itself is a product of disaster.
It was created in 1985 to take over the assets of the Long
Island Lighting Co (LILCO), which was harshly criticized for not
restoring power quickly after Hurricane Gloria that year and for
the construction of the $6 billion Shoreham nuclear power plant
- which failed to win state approval.
Shoreham ultimately was sold to LIPA for a dollar in 1989
and later decommissioned, while LILCO's other power plants went
to local power provider KeySpan. National Grid acquired the Long
Island power plants -- and the contract to operate LIPA's system
-- when it bought KeySpan.
The big question now is how much Hurricane Sandy restoration
will cost -- and who gets stuck with the bill. For comparison,
Hurricane Irene cost LIPA $176 million in restoration costs.
In most U.S. power markets, regulators allow companies to
increase power prices to recoup costs stemming from natural
disasters or unexpected emergencies.
However, in some cases they may not. Connecticut regulators
said in August they would cut Connecticut Light and Power's
(CL&P) return on equity -- essentially preventing it from
raising rates to recover losses -- after the company, owned by
Northeast Utilities, was found "deficient and inadequate"
in its recovery from last year's storms.
CL&P's president resigned under pressure just weeks after a
nor'easter in October 2011 left more than 800,000 customers
without power, some for more than a week.
LIPA has so far not said anything about recovery of
restoration costs related to Sandy.
CREWS FROM CALIFORNIA
Although LIPA has brought more crews to help with Hurricane
Sandy restoration than it did during Hurricane Irene, the
overall pace of restoration still lags.
After Irene made landfall last August, LIPA managed to
restore 93 percent of affected customers within a week,
according to a press release at the time. That compares with
about 77 percent a week after Sandy's landfall.
During Irene, LIPA said it had more than 3,500 off-island
crews to help with the restoration process.
LIPA said Tuesday that more than 12,000 workers, including
7,300 linemen from as far away as California, Washington state
and Arizona, were working to restore power.
Brady, the National Grid spokesman, pointed to the buildup
as a sign of the utility's prompt response to the storm.
"We were ready. We started preparing for this storm long
before it arrived, including making all local arrangements and
assessing support needs from outside the region. Calls for
additional resources began very early," Brady said.
But for local residents and politicians, the buildup doesn't
mean much when they're still out of power more than a week
after the storm.
"Where are the crews? No one is cutting the trees. There are
wires all over the ground and temperatures are dropping and
another storm is on the way," said Michael Koblenz, mayor of the
Village of East Hills on Long Island's North Shore.
The worries of office holders and those on Long Island
still without power are being compounded by a nor'easter heading
for the area on Wednesday.