Categorized | Suffolk Close-up

A Public LIPA

Posted on 25 January 2013

By Karl Grossman

“It never worked. It never will. The time has come to abolish LIPA,” declared Governor Andrew Cuomo in his State of the State speech this month.             However, as News 12 Long Island headed its piece on reaction to Mr. Cuomo’s call: “LI Lawmakers on Privatizing LIPA; Not So Fast.”  That’s an appropriate and sensible response to a poor course of action.

For although Mr. Cuomo has been demanding that LIPA be replaced by a private, profit-making utility — and this month the Moreland Commission he appointed endorsed that — there’s a better choice. It is letting LIPA become what it was supposed to be: a public power company democratically run.

LIPA has never been given that chance.

Instead, New York State officials cobbled out a shell organization called LIPA and placed the operation of Long Island’s electric system in private hands: Keyspan. Then, in 2007, Keyspan was bought by National Grid, a London, England-based company with an unsatisfactory service record at utilities it had earlier taken over in the U.S. Dissatisfied with National Grid, LIPA last month switched its contract to Public Service Electric Gas of New Jersey. London, England? New Jersey? At the least the entity that operates Long Island’s electric system should be a Long Island company.

And, preferably, it should be a public power company democratically run — such as the Sacramento Municipal Utility District (SMUD), considered, originally, a model for LIPA.

SMUD was created in 1923 when, as its website ( notes, Sacramento area “citizens voted to create SMUD as a community-owned electric service” to purchase the local assets of a private utility, Pacific Gas & Electric. It faced bitter resistance from this private utility and it wasn’t until 1946 that SMUD truly began.

SMUD is among 2,000 — yes, 2,000 — public power entities in the U.S. “providing an essential service at a not-for-profit rate,” notes the Large Public Power Council on its website, ( It adds: “Operating on sound business principles, but not to make a profit, public power systems can provide quality and reliable service to homes and businesses for less. Lower electric rates help attract new business and keep existing ones…Because public power systems are community owned, citizens have a voice in utility policies.” SMUD is run by seven trustees elected — yes, elected — by SMUD ratepayers.

SMUD, like Long Island, also had a situation with a nuclear plant. The Rancho Seco nuclear plant was built in its service area and went into highly problematic operation — and was shut down by a vote of SMUD ratepayers about the same time, in the late 1980s, that Long Island’s Shoreham nuclear plant was stopped from going into operation by LIPA’s creation. The hulk of Rancho Seco is now surrounded by solar energy panels — a preferred SMUD energy source.

Mr. Cuomo and others, including New York State legislators, should visit and learn from SMUD, now the sixth largest public utility in the U.S. serving 1.4 million people.

A privatization of LIPA would return Long Island to the electricity-for-profit model we had under the Long Island Lighting Company (LILCO). Consider what the salaries would be of a private company with what the most recent head of LIPA, Michael Hervey, received last year — $275,000. Or the $206,000 long-time LIPA CEO Richard Kessel got when he left in 2006. Google “Ten Highest Paid Utility CEOs” and you will see astronomical figures — among them $9.5 million in yearly compensation for Anthony F. Earley, Jr., CEO and president of Pacific Gas & Electric (and previously CEO and president of LILCO). Their lieutenants get proportionally extreme salaries as well.

We would again have a utility out for profit rather than wise energy choices — democratically determined — and a commitment, like SMUD, to service.

State Assemblyman Fred W. Thiele, Jr. of Sag Harbor in challenging Governor Cuomo’s call for privatizing LIPA accurately stated last week: “The original intent of LIPA, a true public utility governed by Long Islanders, has never been fulfilled as it was envisioned when Governor Mario Cuomo signed the LIPA legislation in 1986. It has never been governed by Long Islanders, and it has never been a ‘real’ utility. It has never been more than a ‘shell’ corporation operated by political appointees who then contracted out operations to [a] private company. The predictable result of this ‘Rube Goldberg’ contraption: a disaster for Long Island.”

It’s not too late — and it’s high time — for LIPA to fulfill its original promise.



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