N.Y. Gov. Paterson Vetoes Bill Requiring LIPA to Get Approval for Rate Changes

New York Gov. David Paterson Friday vetoed a bill that would have required the Long Island Power Authority to get approval from a state oversight board for certain rate increases. The bill's passage in June by the Legislature triggered rating actions last month by two agencies.

Citing the pending legislation, Fitch Ratings and Standard & Poor's revised their outlook on LIPA to negative from stable.

Fitch and Standard & Poor's rate the authority's senior-lien bonds A-minus. Moody's Investors Service assigns its A3 rating.

"Even though it's vetoed at this point, it doesn't mean the negative outlook is going to come off," Fitch senior director Lina Santoro said. "There are still some rate pressures there greater than most for that rating category."

Santoro said they were waiting to see the governor's veto message to understand why he vetoed the bill and what it could mean for possible future actions.

Had the governor signed the bill, LIPA would have had to get approval from the state's Public Service Commission before it could raise rates by more than 2.5% over a 12-month period. It was unclear whether the legislation would have applied to cost increases from higher fuel prices or the cost of purchasing power, but one of the bill's sponsors, Assemblyman Robert Sweeney, D-Lindenhurst, said it would have applied.

"This is not the end of the story," Sweeney said of the veto. "It is almost a certainty that we're going to continue to search for a way to bring some accountability and transparency to LIPA."

LIPA chief financial officer Elizabeth McCarthy said she was pleased with the veto. "This bill would have had the unintended consequence of raising our customers' bills," she said.

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