Governor Andrew Cuomo of New York, where 2 million customers lost power after superstorm Sandy, convened a commission to investigate utility companies for what he said was their failure to properly prepare.
The probe will look into how utilities responded to Sandy, which struck Oct. 29, and tropical storms Irene and Lee last year, according to a statement e-mailed today. The review will be conducted by a so-called Moreland Commission, which under a 105-year-old state law has the power to subpoena witnesses and documents, hold hearings and administer oaths.
“The silver lining of this storm is that the legislature understands we have to overhaul the power-distribution system in this state,” Cuomo said at a press briefing in Manhattan outside the Hugh L. Carey Tunnel, which reopened today. “I don’t think we have a choice. We can use the Moreland Commission with subpoena power to force the investigation, to force the study.”
Sandy knocked out power to more than 8.5 million customers in 21 states. As utilities struggled to get the lights back, they were criticized by Cuomo, New Jersey Governor Chris Christie and thousands of customers, some of whom are still without power. Long Island Power Authority and National Grid Plc (NG/), which operates its electricity network, were sued today by customers accusing them of failing to properly maintain and update an “outdated, obsolete” system.
The commission established today by Cuomo will review the overlapping responsibilities of what he called a “labyrinth” of regulatory bodies, agencies and utilities, including LIPA, the Public Service Commission and the New York Power Authority. The goal is to determine what went wrong and how best to reshape the system, he said.
Cuomo, a 54-year-old Democrat, said those overlapping responsibilities have contributed to a dysfunctional system that brought down gasoline distribution and communication networks.
“Such sustained disruption of the power supply and its cascading damage to other critical systems in many communities, neighborhoods and industrial areas, as well as the continued prevalence of downed utility lines has jeopardized the health and safety of New Yorkers and undermined public confidence in the public utility system,” Cuomo wrote in the order establishing the commission.
Consolidated Edison Inc., (ED:US) which serves New York City and suburban areas, has restored power to more than 1 million customers who lost it during Sandy and a nor’easter that struck Nov. 7. The restorations don’t include 16,300 in flood-ravaged areas of the city whose homes and businesses are too damaged, according to the company’s website.
“Con Edison looks forward to working with the commission to discuss the company’s preparation and response to Superstorm Sandy,” Chris Olert, a Con Edison spokesman, said in an e- mailed statement. “We will continue to work with all parties to review new technology and infrastructure options that would benefit New Yorkers.”
Cuomo has been faulted by lawmakers, including Senator Carl Marcellino, for not exerting the power he wields over LIPA, which provides power to about 1.1 million customers in Nassau, Suffolk and Queens counties through National Grid. After Sandy, about 90 percent of those customers lost power and 52,000 were still in the dark today, according to the authority’s website.
LIPA is a state agency run by a 15-member board of trustees, nine of whom are appointed by the governor. Four of those nine seats are vacant and two members, including Chairman Howard Steinberg, are serving with expired terms. In almost two years in office, Cuomo has appointed only one board member.
“I don’t think you can have an operation that isn’t fully appointed,” Marcellino, a Long Island Republican who heads the senate’s investigations committee, said in a telephone interview before Cuomo announced the Moreland Commission. “Terms expired and seats are empty. More has to be done in that area.”
Cuomo said today that it doesn’t matter who’s in charge of LIPA because the authority is broken.
“I believe LIPA has been beyond repair for a long, long time,” he said. “I don’t believe you can fix it. I believe it needs to be overhauled and you need a new system.”
LIPA supports the statewide study, Mark Gross, a spokesman for the agency, in an e-mailed statement.
“Given the extreme weather patterns we have seen, a statewide study is appropriate,” Gross said.
LIPA doesn’t provide the power anyway, Cuomo said.
National Grid operates, maintains and repairs LIPA’s power lines through Dec. 31, 2013. Last year, the authority picked Public Service Enterprise Group Inc., owner of New Jersey’s largest utility, to take over the contract in 2014. The structure is unique to LIPA.
LIPA was formed in 1985 by state lawmakers because of a “lack of confidence” in Long Island Lighting Co.’s ability to supply power in a reliable and economic way after its investment in the ill-fated Shoreham nuclear plant. Shoreham, the most expensive nuclear power project built in the U.S., was shut in 1989 after the state raised questions about the ability to evacuate Long Island in the event of a radioactive release.
In 1998, LIPA bought the remaining lighting company assets, including its power lines and power plants.
The authority has about $7 billion in debt, according to a May report by Moody’s Investors Service. Since 1998, LIPA has issued $1.8 billion to finance capital projects, according to a June offering statement. In a report yesterday, Fitch Ratings said the effects of Sandy will challenge LIPA’s finances and frustrate the authority’s efforts to improve its financial performance.
“Given the intense political pressure surrounding LIPA’s storm response and the authority’s historic objective to moderate already high electric rates, Fitch believes that LIPA’s willingness to increase rates may be limited,” the report said.
That political pressure was already growing, even before Sandy. In a June report requested by Cuomo, the Public Service Commission found that LIPA fell short in its preparation and response to Tropical Storm Irene. The authority, which isn’t regulated by the state commission, didn’t provide accurate and timely power-restoration estimates, according to the report.
“Communication with the public should be as high a priority as restoration,” according to the report, one of three released June 28 on utility preparation and response to the 2011 storms. “Had better communications been achieved with customers and local officials, this criticism might have been dampened and the positive aspects of the storm response efforts could have been better appreciated.”
After Sandy, it was clear that LIPA and National Grid were still struggling with communication, according to residents.
“It wasn’t just the fact the power was out,” said Ellen Schlank, a Plainview resident who still lacked electricity as of noon today. “It was a devastating storm; everyone understood that. It’s the lack of communication. We just want to know when the power will come back. That’s the worst part about it.”
As Cuomo looks to overhaul the system, he’ll probably find support among lawmakers, Senator Michael Gianaris, a Queens Democrat who led the party’s effort to retake control of the Republican-led chamber, said in a telephone interview today.
“Governor Cuomo is a master at using whatever leverage is available to him to get results,” Gianaris said. “I would expect receptive ears on the issue of reforming utilities.”
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