LIPA seeking $350M bridge loan to cover costs for Tropical Storm Isaias
The LIPA board of trustees on Wednesday approved a measure to allow the authority to borrow up to $350 million as a "bridge" loan to cover the costs of restoration from Tropical Storm Isaias until the utility is reimbursed for the costs by the federal government.
LIPA expects to receive up to 75% reimbursement for its storm costs, but the utility is still awaiting a disaster declaration by the Trump administration for the Aug. 4 storm. Without it, LIPA would not be eligible, and the entire $350 million would be billed back to ratepayers.
Earlier this month, . Rep. Kathleen Rice (D-Garden City) and State Sen. Todd Kaminsky (D-Long Beach) wrote to President Donald Trump asking him to declare a major disaster area in New York, chiefly to allow for the Isaias storm restoration costs to be reimbursed to LIPA.
"The storm’s cleanup costs, especially for PSEG-LI, will be tens of millions of dollars and this necessary declaration will ensure that ratepayers alone will not bear the brunt of it," the lawmakers wrote.
LIPA, in its proposal to the board, said it already has the ability to borrow to cover the costs, but said costs could come in higher.
"LIPA maintains bank facilities and a commercial paper program," LIPA said in its board resolution. "However, costs associated with severe storms may exceed $350 million, and despite the anticipated recovery of a majority of those costs from FEMA, there could be additional pressure placed on LIPA’s liquidity due to potential delays in recovery of costs from FEMA or from additional severe storms."
LIPA in a board presentation said the "expectation" is that the Federal Emergency Management Agency will reimburse LIPA for the roughly $330 million in storm costs, which includes $11 million for meals and hotels for workers, $250 million for off-Island labor and $34 million for PSEG and on-Island labor.
About $75 million of the costs will be paid through a charge to the LIPA storm budget through an annual delivery service adjustment charge paid by ratepayers.
LIPA said the disaster declaration can take four months or more. If the federal government doesn't approve it, said LIPA spokeswoman Jen Hayen, "LIPA will recover any costs from customers over a period of a number of years," a scenario she called "unlikely."
The meeting to approve the measure was also the first time PSEG Long Island officials faced LIPA trustees since the widely criticized response to the storm that caused more than 645,000 outages and left some 503,000 customers, including several trustees, in the dark for up to eight days. Some trustees expressed anger, but not at PSEG.
Instead, three board members took exception to comments made by Sen. Jim Gaughran (D-Northport) during the meeting in which he advocated for Public Service Commission authority over LIPA, criticizing the current "review and recommend" model of the Department of Public Service as inadequate. LIPA's board then votes on DPS recommendations, routinely adopting them.
"I'm sorry, but that is not the same thing as [a regulator] having the power to immediately take action for the benefit of ratepayers," Gaughran said.
LIPA vice chairman Mark Fischl said he "took offense" to Gaughran's comments, noting that board members "spend a lot of time and effort" in their role over LIPA. "What he [Gaughran] is doing is not helping solve this problem," Fischl said.
Trustee Sheldon Cohen called it "personally insulting to me to be labeled as part of LIPA's mismanagement and failed oversight," noting that many board members were without power after the storm. Trustee Elkan Abramowitz said he was "very proud" of LIPA and PSEG's responses to the "mistakes that were obviously made" following the storm. He said Gaughran "probably is uneducated to the ways LIPA has been operating since the LIPA Reform Act."
LIPA chief executive Tom Falcone asserted that PSEG has "the most scrutiny of any of the state's utility," and called LIPA the "most transparent."
Gaughran aide Marissa Espinoza responded: "After 10 days in the dark, all of Long Island is 'educated' to the failed ways in which LIPA has been operating. Apparently the only one who thinks LIPA should remain exempt from the state oversight ... is LIPA."
In other news at the meeting, LIPA board members approved a measure to spend $6.4 million over 25 years to help operate the new $25 million energy and nature center at Jones Beach to which LIPA ratepayers have already contributed some $9 million for construction.