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LIPA alternate ideas

July 19, 2013 @ 12:00 am EDT

Today’s program was very different from our usual format. Victor Yannacone was our first speaker, and he laid out the history of how we got her and the plan to extricate us from the present untenable situation. Then we had attorney, Irving Like, former utility executive Matt Cordaro, former LIPA trustee Sheldon Sackstein and then Sierra Club environmental expert Peter Gollom. Each had a valuable opinion to share.

 

Yannacone was one of the original people that joined hands and stopped Shoreham, but his greater recognition comes from his successful suit that was known as "Agent Orange" whereby the chemical companies had to make medical and other compensation available to Viet Nam era combat soldiers.

 

Now Yannacone has created an idea that will no doubt disturb the established powers. Victor began by describing the role of electric power companies as boosters for the local communities which, I for one interpreted as a positive. In contrast here is how Victor continued, "LIPA is failing the ratepayer and is strangling the economy of Long Island." According to Yannacone that LIPA was never designed to serve the public, it was designed to compensate the bond holders.

 

Victor cited the economic boon of the war years that, but in the end LILCO drove businesses off the island. "Without any regard for rational economics the decision by LILCO in 1973 to build a nuclear electric power plant set the stage for economic catastrophe’…

 

Under the rules that regulated utilities operate under it was in the perceived interest to build as expensive a plant as possible because the higher the cost, the greater the return to investors. This thinking ignores the fact that the inflated rates make the region uncompetitive. That’s exactly what happened.

 

LIPA was created in 1986 with express purpose of assuming the liabilities of LILCO in particular Shoreham Nuclear Plant. In 1989 LILCO sold Shoreham to LIPA for $1. LIPA assumed the debt of $6billion. Later LIPA acquired LILCO’s antiquated electric transmission system. In the same year all of the generating capacity was transferred to Brooklyn Union Gas which when joined with LILCO became Keyspan.

 

The ratepayers got all of the liabilities and none of the valuable assets. In January of the year 2013 Governor Cuomo proposed the privatization of LIPA. In other words here we go again. We were given the responsibility to pay off the LILCO debt. "Did anyone ask us?"

 

The Alternative

The alternative according to Yannacone is to create a mutual company. A mutual company would operate in a manner that is similar to a mutual life insurance company. The policy holders "own" the company and vote for the directors. No elected official would have any say in who is on the board.

 

The Board of Trustees must select management that is cognizant of the power company’s critical place of electric power in the economy of Long Island. This would be vastly different from the structure of an investor owned utility.  Rather than an investor owned utility we will have a ratepayer owned entity with the sole purpose of supplying reliable, reasonably priced power. This will facilitate the support of economic growth. There is nothing wrong with a corporate structure as long as the ratepayers are also the stockholders. If you have an electric bill, you have a vote.  "LIPA must belong to its ratepayers and its management must be accountable to the ratepayers" This differ from a municipal company because a municipal company is owned by the taxpayers and is subject to the whims of politics.

 

Attorney Irving Like spoke next and he pointed out that the relationship that LIPA will have with PSE&G will jeopardize the tax exempt status of LIPA bonds and make the situation worse. He also pointed out that the whole notion of the operation of LIPA may be illegal from the inception.

  

Mathew Cordaro PhD was vice president of LILCO and later the president of Nashville Electric he also was the chief executive of the Midwest

 
Independent Systems Operator a company that coordinates distribution of power for several states and provinces in Canada. His experience in investor and municipal power has given him a perspective that is unique among the participants and felt that Yannacone’s idea was more suitable to rural areas where the idea is presently being used. He did not feel the economics would work on Long Island.

Peter Gollom representsSierra Club and his concern was with the solar program that has put Long Island in the forefront of solar installation. Long Island presently has more solar power installed than the rest of New York State.  

 

Sheldon Sackstein was once a LIPA trustee and his sentiments was with making sure we had an elected boardDuring what was a very, very lively discussion that followed the speakers.

 

The big question was about the debt. What do we do with it?

Renegotiate it, was Victor’s answer. The debt is held by institutional investors, hedge funds and sovereign funds. They would have to take a hit.

Q: When the solar installations syphon enough customers off the grid how will that effect the system?.  

 

That makes the bonds even more untenable. As more customers leave the system the burden increases for the remaining customers. That is one of the reasons that the debt cannot be allowed to continue.

Would the size of the ratepayer’s bill be relevant?

No! If you have a bill, you’ll have a vote. If you own a home and a business with a separate bill you will have 2 votes.

Is it too late to act?

No, we were never asked and we did not agree to anything.

How do we stop this?

We start with an ad-hoc committee, just the way we began to close Shoreham. This entire meeting was taped and the tape will be available in about 5 days.

Details

Date:
July 19, 2013
Time:
12:00 am EDT

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