New York Gov. Andrew Cuomo is considering extending electric utility PSEG's control over the Long Island Power Authority in January.
Long Island electricity customers have been unhappy with LIPA's high rates and slow response to storm-related power outages. In January the Moreland Commission, which Cuomo appointed, released a recommendation to privatize LIPA. Two days later Cuomo endorsed the recommendation.
Since then several commentators have criticized the proposal. The ratings agencies have said a privatization would require LIPA to immediately redeem all outstanding bonds and notes.
Since endorsing privatization, Cuomo has retreated. A source close to the governor said he was considering privatization, full municipal control, extending PSEG's control, and other options. None of the options has emerged as the leading option, he said.
PSEG is already scheduled to operate and maintain LIPA's electrical system starting in January. In the proposal that the state is considering, PSEG would also control capital and operating budgets, storm preparedness and response, call centers, computer systems and customers service, the gubernatorial source said.
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, the source said.
