PSEG Long Island agrees to revised contract terms that align with the terms of the June 2021 agreement. LIPA announces a public engagement period to offer customers and stakeholders an opportunity to be heard on the terms of the reformed contract.
PSEG Long Island agrees to a non-binding term sheet that addresses the issues discovered during the Isaias Taskforce Investigations.
- A greater share of management compensation at risk based on performance
- Expanded performance metrics with greater rigor covering all categories of service
- Use of gating and default metrics to discourage singularly poor performance
- Strengthen Long Island-based management and accountability for Long Island operations
- Require compliance with Board recommendations to address known deficiencies
- Strengthen oversight in long-term planning, project prioritization, and budget development
- Partition Long Island IT systems and facilitate independent verification and validation
The LIPA Board of Trustees wants to hear from our elected officials, stakeholders, and most importantly, customers on the alternatives to improve the future management of LIPA’s assets. As such, the Board has arranged two virtual public comment hearings starting at 6 p.m. on Tuesday, May 25, and Thursday, May 27. To register to speak at one of the sessions, click here.
In April 2021, LIPA released the Phase II Report of its Options Analysis. This report carefully details the pros and cons of four management options and provides the Board and stakeholders with the facts to make an informed decision. These options include:
- Option 1: Sell LIPA’s Assets to Private Investors
- Option 2: Reset the PSEG Long Island Relationship and Reform the Contract
- Option 3: Contract with a New Service Provider to Improve Operations
- Option 4: Bring Utility Operations Under LIPA Management
LIPA published and presented the Phase I Options Analysis for the Management of LIPA’s Assets. The Options Analysis explored three potential alternatives for the future management of LIPA’s assets, including (i) privatization, (ii) continuing to contract day-to-day management to PSEG Long Island or another utility under a re-negotiated contract; and (iii) terminating the PSEG Long Island contract and directly managing LIPA operations.
The report found that privatization would significantly raise residential customer bills by an average of $32 a month. The report also recommended the types of changes that would be required under a reformed contract with PSEG Long Island. Finally, the report identified that terminating the PSEG Long Island contract and directly managing LIPA assets was not only feasible but could result in savings of up to $815 million over the term of the agreement.
The LIPA Board directed LIPA’s CEO to pursue both a renegotiation of the PSEG Long Island management contract as well as planning for termination of the PSEG Long Island contract, with LIPA taking over direct management of utility assets, and to report back no later than March 31, 2021.
LIPA filed a complaint in the New York State Supreme Court against PSEG Long Island for breach of contract and specific performance related to Tropical Storm Isaias. The filing had been recommended by DPS and ordered by the LIPA Board of Trustees based on the investigative findings. The complaint seeks $70 million in damages related to PSEG Long Island’s inadequate design, implementation, and testing of its outage management and communications systems, which failed during the storm, and the absence of business continuity plans in the face of such failures during a major weather event.
LIPA’s Board of Trustees adopted nearly 100 recommendations from the 30-Day and 90-Day Task Force Reports to improve PSEG Long Island’s management, emergency response operations, and information technology.
The Task Force’s main recommendation was to change the way LIPA’s assets are managed to provide greater alignment and accountability to Long Island customers. The Board asked staff for an analysis of LIPA’s alternatives to implement this recommendation.
Based on the DPS investigation and the Isaias Task Force’s 90-Day Report, the Board also found that PSEG Long Island had failed to meet their contractual obligations to LIPA for storm restoration and ordered that LIPA staff investigate and pursue all contractual and legal claims.
LIPA’s Isaias Task Force issued a 90-Day Report to the LIPA Board of Trustees, elected officials, and stakeholders. The 90-Day Report expanded on the findings of the 30-Day Report and addresses broader questions on the effectiveness of PSEG Long Island’s management of utility operations.
The 90-Day Report concluded, based on extensive analysis, that the problems PSEG Long Island experienced restoring power during and after Tropical Storm Isaias were preventable and that their root cause was management failures rather than technical issues.
In fact, the investigation found that PSEG Long Island knew that critical information technology systems were performing poorly and too insufficient action to address the problems. In one such email dated July 16, PSEG Long Island staff alerted management on Long Island and in New Jersey that PSEG Long Island was “NOT even managing on a day-by-day basis and [PSEG Long Island is] definitely NOT prepared for a weather event. Management needs to know this is no closer to being resolved after 3 weeks.” However, PSEG Long Island management failed to take prudent steps to either fix the systems that were failing or to implement contingency plans.
PSEG Long Island management also failed to inform LIPA of these issues before, during or after the storm, which were only uncovered as a result of the investigation. Instead, PSEG Long Island attempted to deflect blame on Verizon for its own failures.
On November 13, 2020, DPS provided a recommendation to the LIPA Board as a result of its investigation of PSEG Long Island’s storm response. DPS Staff identified more than 70 potential violations of PSEG Long Island’s Emergency Restoration Plan.
The DPS recommended, among other things, that LIPA:
- evaluate options to terminate PSEG Long Island as LIPA’s Service Provider;
- declare PSEG Long Island’s poor performance during Isaias as a first failure of the Major Storm Performance Metric as defined in the OSA; and
- seek to either terminate or renegotiate the OSA to enable greater oversight by LIPA and DPS.
LIPA’s Isaias Task Force published and presented the 30-Day Report to LIPA’s Board of Trustees at the September 23, 2020 Board Meeting.
The 30-Day Report identified PSEG Long Island’s most consequential failures during Isaias, provided preliminary results of the Task Force’s investigation of the technical causes, and recommended 39 immediate corrective actions for PSEG Long Island to implement by October 15.