Cuomo Weighs Expanding PSEG Control Over LIPA

New York Gov. Andrew Cuomo is considering expanding electric utility PSEG’s control over the Long Island Power Authority as an alternative to privatization of LIPA.

Cuomo had endorsed a January recommendation by the Moreland Commission -- which he appointed -- to privatize the Long Island utility, after customers complained of high rates and a slow response to storm-related power outages.

Since then Cuomo has retreated as several commentators criticized the proposal and the ratings agencies said a privatization would require LIPA to immediately redeem all outstanding bonds and notes.

The governor is now considering extending PSEG’s control along with other options. “The Governor has been clear from the beginning the only option we will not accept is continuing the failed status quo,” said Cuomo spokesman Matthew Wing. “We are continuing to evaluate a series of options and will make a final decision based on which one best meets the Governor’s goals of keeping rates affordable, keeping property taxes low, and improving customer service as well as disaster readiness and response.”

PSEG is already scheduled to operate and maintain LIPA’s electrical system starting in January. In one proposal that the state is considering, PSEG would also control capital and operating budgets, storm preparedness and response, call centers, computer systems and customer service, Wing said, confirming statements made by secretary to the governor Larry Schwartz.

As part of this proposal the state would securitize a portion of LIPA’s debt. LIPA would maintain its ability to issue tax-exempt bonds. LIPA would seek a lower interest rate on the securitized debt.

For the debt to be securitized, the New York legislature would have to pass a law. If it chooses to go down this path, the Cuomo administration hopes to pass the law before the end of the current legislative session in June, Wing said.

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