New York Power Authority for Long Island Common Sense Solution to a Complex Problem

By A. G. Moore 1/15/2012

Robert Moses-Robert H. Saunders Power Dam
Photo by Bouchecl
Public Domain

On December 10, 2012, after Super Storm Sandy delivered its power punch to New York State’s energy infrastructure, Fitch Ratings assessed the financial soundness of the New York Power Authority. Fitch assigned an AA grade to the Power Authority’s bond offering and also awarded NYPA a “Stable Rating Outlook”. In justifying this assessment, Fitch described the factors supporting its positive view of NYPA:

1. NYPA is the “largest nonfederal public power producer in the U.S”.

2. The Power Authority serves a diverse client base across the state.

3. Its operations rely heavily on “green” hydropower, which lowers the cost basis.

4. NYPA is fiscally conservative and has “solid liquidity and risk management practices”.
In addition to the Fitch endorsement, there is in NYPA’s favor the fact that it  delivers the lowest cost energy in New York State.

A problem with having NYPA take over LIPA would be that NYPA does not operate as a retail electrical distributor. NYPA transmits electricity to local utility companies, such as LIPA and Con Ed.

Certainly, NYPA could take over the current function of National Grid, which showed during Super Storm Sandy that it had a completely dysfunctional relationship with LIPA.

NYPA’s mission, as described on its website, is:

Provide clean, low-cost and reliable energy consistent with our commitment to the environment and safety, while promoting economic development and job development, energy efficiency, renewables and innovation, for the benefit of our customers and all New Yorkers.

Also, the Authority explains that it carries out its mission …without the use of any tax revenue or state credit. We finance construction of our projects through bond sales to private investors, repaying bondholders with proceeds from our operations.

NYPA is a public benefit corporation. As such, according to Article 9, General Provisions of New York Code, the corporation must reimburse the state for any costs incurred by the state in support of the corporation’s activities. Therefore, if NYPA were to replace National Grid and assume some responsibility for delivery of Long Island’s electricity then there could be no net revenue loss to the state, even though NYPA has a quasi-governmental status. And Long Island would have the benefit of oversight by an agency which consistently and dependably delivers some of the cheapest energy in the country.

What’s wrong with that picture and why has Andrew Cuomo ruled out this option in favor of privatization? ( See libn.com article: Quinones: NYPA will not take over LIPA).

Without a full explanation from the Governor, the end-line consumer is left to wonder what factors have entered into his decision. There is certainly a lot of money to be made, eventually, by someone in the transfer of LIPA to a private entity. There is also the political climate, which may be one of the more important of Cuomo’s influences. If he has an eye to gaining national office, then it would not be helpful to his chances to have in his resume the appearance of “expanding government”.

As he looks across the state border to New Jersey, where Christie is poised for national vetting, Cuomo must surely be calculating. We live in times when a charge of “big government politician”  can torpedo a career.  Cuomo has been careful, as Governor, to plant himself firmly in the middle of the political spectrum. He is the consummate “moderate”.

In a national political campaign, expanding NYPA would be seen as a misstep. Privatizing is more in line with the electorate’s appetite. The biggest jeopardy to the Long Island consumer in the privatization scheme–crushing increase in rates–would not become a reality for at least three years, which is when the moratorium on rate increases would expire. Three years would take Cuomo past the 2016 election cycle.

If it is true that national ambitions for 2016 are playing into the governor’s decision process, then he has to stop. He has to look inside himself for the courage and integrity to represent the interests of the people he currently serves and not court favor with people he hopes one day to please.

References

Long Island Power Authority Sued Over Hurricane Sandy

New York Power Authority Case Study

Public vs. Private Power: from FDR to Today

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