Newsday: State: LIPA needs better storm-cost planning
December 30, 2010, 10:42 PM
by Bill Bleyer
The Long Island Power Authority has overspent its storm-repair budget by hundreds of millions of dollars since 2001 and needs better planning to reduce the cost to consumers, State Comptroller Thomas DiNapoli said Thursday.
His report said LIPA exceeded its storm budget by an average of 80 percent over the decade. It predicted this year's costs will overshoot the estimate by 640 percent.
"Predicting the weather is not an exact science and neither is predicting cleanup and restoration costs," DiNapoli said. "But . . . LIPA's methodology for determining storm costs is flawed and needs improvement. Long Islanders already pay some of the highest utility costs in the nation. LIPA should do everything it can to minimize costs while maintaining response time."
LIPA said it agreed with the findings and has already begun to make changes.
According to DiNapoli, LIPA spent $428.7 million to undo storm damage over the decade - 173 percent more than the $157 million in its annual budget plans.
The report, prepared before last Sunday's blizzard, estimated the authority's storm costs this year would be a record $200 million. LIPA budgeted just $27 million.
LIPA said Thursday it has actually spent even more this year - $207 million, including $4 million for the blizzard. The Federal Emergency Management Agency reimbursed LIPA $57 million after the March nor'easter. The utility says it paid the rest from its reserves, not by raising rates.
But LIPA critics say repair costs are ultimately borne by consumers. And DiNapoli and others question whether LIPA has gone overboard in bringing in outside crews before storms hit, most recently for Hurricane Earl in September, which turned out not be the major storm LIPA had anticipated.
Matthew Cordaro, a former utility executive for LIPA's predecessor, the Long Island Lighting Co., said, "LIPA has been overly concerned about the public relations and political aspects of storm restoration.
"For that reason, they tend to overreact," he continued. "They call out people in advance and have them standing by very quickly before the obvious need develops. This doesn't adhere to established utility procedures."
"They could potentially save ratepayers money" with better planning, he said.
LIPA Chief Operating Officer Michael Hervey said the authority "has taken a hard look at possible improvement" in its system for bringing in off-Island crews.
DiNapoli's findings "are consistent with what LIPA management has already implemented based on our internal reviews," Hervey said.
"LIPA agrees with the comptroller that budgeting for storms needs a second look and thus had already increased its storm budget for 2011 to be more in line with historical storm costs, while reducing customer rates to their lowest levels since 2007."
LIPA's 2011 storm budget will be $46 million, a $19 million increase.
DiNapoli' study was requested by state Sen. Charles Fuschillo (R-Merrick) after LIPA spent $33.7 million on Hurricane Earl, including an estimated $21.6 million to bring in 1,600 workers in preparation for a storm that caused no damage.
Alternatives to committing to out-of-area crews so far in advance could save millions of dollars, DiNapoli said.
Fuschillo agreed. "I strongly believe that LIPA's plan for Hurricane Earl was excessive and resulted in exorbitant ratepayer expenses," he said.