LIMBA Dr. Matt Cordaro- A Case for Municipal Power
March 22, 2013 @ 12:00 am EDT
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Our speaker today is a man well known to us for his knowledge and involvement with the electric utility business. Dr Matt Cordaro was vice president of LILCO. Subsequently he worked as president of Longlake Electric and then for Nashville Electric Service as president and CEO.
Nashville is a municipal power company while the others are private entities. Cordaro’s experience in those roles made us here at LIMBA conclude that he was the most credible voice in the discussion of where we should be going with LIPA.
Cordaro began by pointing out that LIPA had an organizational problem. Moreover it was a structure that was from its inception an experiment. It was a municipal system in name but the whole plant operations were in the hands of a private company. However, unlike other utilities, such as Con Edison, there was no Public Service Commission oversight.
As a result of no oversight LIPA racked up a variety of problems. Among the problems were over billing, high rates and less than stellar hurricane responses.
The governor established the Moreland Commission, which appeared to most of us as a quick way for the governor to sweep away a particularly thorny problem. The result of the Moreland Commissions work looked more like a rubber stamp for a pre-ordained opinion and the alternatives were not fully explored.
Here are the alternatives that Dr Cordaro presented;
1) Remain the same with some modifications on board selection methods, and PSC oversight
2) Privatize and deal with the additional costs of doing business, corporate profit, taxes, and finance. There is also the prospect of greater efficiencies, but that fruit has already been squeezed dry, because the only efficiencies that amount to any scale are labor costs. According to Cordaro the utility is understaffed right now, so he questions where those efficiencies would come from
3) Municipal Power was the last choice he mentioned, but he stated that it must be a true municipal. That would mean the employees would work directly for the utility. The generating equipment could be owned by the municipal company, but hundreds of municipals across the nation do buy power from private generators.
The idea that taxes would go away is probably wrong as many public power companies do pay property taxes, but they do not pay taxes on profits. There are no profits, because rates are geared to operating costs with no need to earn a profit. Muni’s’ do not have stockholders so there is no need to pay dividends. Matt pointed out that Nashville Electric generated none of its power, it merely purchased from the lowest priced provider.
One the points made by the Moreland Commission was that it would be hard to find management and workers. Cordaro wasn’t buying that; he stated that hiring competent people has never been the problem in his own experience, nor did he ever hear that complaint from other municipal providers.
Another point made was that a private company has no access to FEMA funds. On Long Island FEMA is providing 70% of the utility’s restoration needs.
The Q&A was lively and there were a fair number of people in the room that thoroughly understood the issue