PSEG to run most of New York's LIPA utility


Long Island Power Authority, a state-owned New York utility company that was criticized for its response during last year's Superstorm Sandy, will see most of its operations taken over by a private company, New York Governor Andrew Cuomo said on Monday.

Public Service Enterprise Group Inc , a private utility in neighboring New Jersey, will take over management of LIPA's operations next year. Lawmakers faulted a bifurcated system where operations were partly run through a services agreement with UK power company National Grid Plc .

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Sandy in October left more than 90 percent of the 1.1 million LIPA customers on Long Island without power, some for more than two weeks.

LIPA's services agreement with National Grid is due to expire at the end of 2013. PSE&G was already set to take over as the system's operator but the governor's proposal will see that role expanded to take over most of the company's operations.

"LIPA is broken and LIPA has to go away," Cuomo said at a press conference in the state capital Albany. "We need a new and better way to provide utility services on Long Island."

LIPA will, however, remain a state-owned holding company that will allow it to receive federal disaster funding and certain tax advantages, Cuomo said. The governor also cited "philosophical reasons" for keeping LIPA in state hands. He did not elaborate.

The governor said the proposal includes a change in the law that allows LIPA to refinance half of its $6.7 billion debt at lower interest rates. About 10 percent of consumers' energy bills under LIPA are made up of debt payments, the governor said.

The proposal will also cut the number of LIPA board members to five from 15 and LIPA staff to about 20 from 90.

(Reporting by Edward Krudy; Editing by Phil Berlowitz)