The Long Island Power Authority would transition to operating its own electric grid after its current contract with PSEG expires in 2026, if an action plan created by the New York State Legislature’s LIPA commission is adopted by the state.
The transition would avoid the need for the utility to pay $78 million in fees to the private for-profit PSEG, which currently manages the electric grid for LIPA, allowing more money to be invested into other initiatives like lower rates and infrastructure improvements, according to the commission’s proposal. LIPA would be governed by a 13-member board appointed by elected officials, labor interests and other stakeholders, the proposal states.
The transition is detailed in a final report approved by the LIPA commission on Nov. 17. The final report includes legislation that will be formally introduced by the commission’s co–chairs, State Senator Kevin Thomas (D-Levittown) and Assembly Member Fred Thiele (D-Sag Harbor), in their respective branches of the legislature in January.
“LIPA has among the highest rates and lowest customer satisfaction in the country,” Thiele said in a press release announcing the report. “The Commission’s report returns to the original vision of public power when LIPA was created by the Legislature in 1986. The report demonstrates the potential to save over $500 million over the next decade while reforming the LIPA Board through the appointment of 5 members by local governments and the creation of a Community Stakeholder Board.”
“Accountability, oversight and transparency will be enhanced while eliminating costly outside management fees,” Thiele said. “These public benefits can be realized while still protecting the rights and benefits of our respected local workforce.”
The Department of Public Works would retain regulatory oversight of LIPA, and the state comptroller would be empowered to establish pre-approval guidelines and thresholds for all LIPA contracts, according to the commission. Ownership of ServCo LLC, the entity established solely to employ the energy grid’s workforce will transfer from PSEG to LIPA; the legislation would enshrine into law the private-sector employee status of ServCo’s unionized employees and their collective bargaining rights, according to the commission.
LIPA was created by state legislation in 1986 in response to the decision by the Long Island Lighting Company to pursue construction of the Shoreham nuclear power plant, which the State Legislature found “imprudent.” LIPA was charged with closing and decommissioning the plant, which was accomplished in 1994.
LIPA replaced LILCO as the electric company for the Long Island/Rockaways service area in 1995, but was never established as a true “publicly owned power authority” as originally envisioned by the State Legislature and expressed in the 1986 statute. Rather, LIPA has been managed by a third party, and is currently in contract with PSEG Long Island through Jan. 1, 2026.
But in 2022, the governor signed legislation creating the commission, formally known as the Legislative Commission on the Future of the Long Island Power Authority, and directing it to create an action plan. The legislation states that LIPA’s third-party management model is the only of its kind in the United States, lacks transparency and oversight and has “repeatedly failed its customers,” pointing to the responses to Superstorm Sandy in 2012 and Tropical Storm Isaias in 2020.
“Long Islanders pay some of the highest electric rates in the country,” said State Senator Anthony Palumbo, a member of the commission. “We as elected officials must do all we can to protect ratepayers while at the same time ensuring that our system is storm hardened and help is accessible to customers.”
“This investigative process has allowed us to learn more about the issues we face with the current model and the challenges that lie ahead,” he said. “My focus throughout this process has been to formulate a proposal that will lower costs for Long Island families and businesses, ensure reliable service, protect workers, and provide a governing model with local control and accountability. Now, we must continue to work together to achieve these critical goals.”
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