News Release Date: October 27, 2011
LIPA Trustees Vote for Improved Public/Private Partnership to Operate Long Island’s Electric Grid
Improved Business Model Provides LIPA with More Direct Oversight and Management Control, Keeps Jobs on Long Island
Uniondale, NY—Today, the Long Island Power Authority (LIPA) Board of Trustees approved a plan to restructure the way LIPA contracts for services to operate its electric utility business. Beginning in 2014, LIPA will adopt an improved business model, which includes a dedicated business unit providing services exclusively to LIPA. The improved business model is designed to enhance the quality of customer service, provide long-term workforce stability and allow LIPA to more effectively manage costs.
The decision was based on a year-long independent and comprehensive study of LIPA’s strategic organizational options conducted by The Brattle Group of Cambridge, MA, a leading consulting group with industry expertise providing rigorous analysis in complex economic strategies. The study concluded that contracting for the operation of LIPA’s electric system under an improved public/private business model would provide the best combination of low-cost and transition risk, while allowing for flexibility to transition to other business models in the future.
The improved public/private business model has the following attributes which will benefit LIPA’s customers:
- Dedicated business unit providing services exclusively to LIPA;
- More direct oversight of utility operations;
- Direct control and transparency over costs and staffing levels;
- Continuity for a consistent and experienced workforce dedicated to providing superior services to LIPA customers;
- Flexibility to transition to other strategic models in the future.
The strategic organizational study also analyzed additional options including selling LIPA’s electric system to a private entity (privatization) or bringing the entire workforce currently serving LIPA into LIPA’s internal organization (full municipalization). LIPA proactively solicited comments from government officials and the public by conducting multiple governmental briefings, informational sessions and public input sessions regarding the analysis.
“There is a new LIPA on the way,” said Chairman of the Board, Howard Steinberg. “The Board of Trustees approved critical changes for our business by choosing the lowest-cost business model option, which will have a beneficial effect on rates and provides the best value for our customers regardless of the choice of a service provider. The new, improved model will enable LIPA to better manage rates going forward through direct oversight of costs and staffing, improved reliability, and continuity for a consistent and experienced workforce dedicated solely to LIPA, “In addition, this improved business structure preserves LIPA’s long-term options to form a traditional municipal utility organization or sell the business, should either option become desirable in the future.”
The adoption of the enhanced business model will lead to a decision to select a service provider as part of a competitive procurement to contract for the operation, customer service, maintenance, repair and expansion of LIPA’s electric transmission and distribution business beginning in January 1, 2014. LIPA anticipates that the Board of Trustees will take action on this matter at the December Board of Trustees meeting.
www.lipower.org/strategicreview
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LIPA, a non-profit municipal electric provider, owns the retail electric Transmission and Distribution System on Long Island and provides electric service to more than 1.1 million customers in Nassau and Suffolk counties and the Rockaway Peninsula in Queens. LIPA is the 2nd largest municipal electric utility in the nation in terms of electric revenues, 3rd largest in terms of customers served and the 7th largest in terms of electricity delivered. In 2011, LIPA outperformed all other overhead electric utilities in New York State for frequency and duration of service interruptions. LIPA does not provide natural gas service or own any on-island generating assets. More information about LIPA can be found online at http://www.lipower.org.
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