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Moreland Commission

Moreland Commission Preliminary Recommendations

According to preliminary recommendations issued January 7, 2013 by a commission appointed by Governor Cuomo, oversight of utilities by the Public Service Commission (PSC) needs to be strengthened and the Long Island Public Authority (LIPA) should be privatized or folded into the New York Power Authority (NYPA).  Cuomo formed the Moreland Commission in November 2012 to examine utilities’ storm response following Hurricane Sandy.

In the commission’s presentation to Cuomo and his cabinet, the panel’s commissioners described three options for the future of LIPA: selling the authority’s assets to an investor-owned utility; expanding LIPA and giving it a “direct role” as opposed to the current structure of hiring an operating consultant; or, having NYPA take over responsibility for running the long island grid.

The first option, privatization, posed the fewest risks in terms of service and cost to taxpayers/customers, the panel concluded.  Commission co-chair Ben Lawsky, superintendent of the Department of Financial Services, said that LIPA currently carries about $3 billion in unsecured debt ($7 billion in debt related to the decommissioned Shoreham Nuclear Plant against $4 billion in assets) that would have to be disposed of — a complex transaction, he said.

Commission co-chair and former state Attorney General Robert Abrams discussed proposals for boosting enforcement powers of the PSC, ranging from better advance work assessing utilities’ emergency response plans to larger penalties for those that fall short of restoration targets. The state, he said, should also be given explicit power to revoke a company’s operating certificate.  Finally, local governments should be given a greater role in directing utility restoration following large-scale outages.

The Governor had said he wanted at least a preliminary report from the Commission to consider in advance of his State of the State address, which he will give on Wednesday, January 9.

The Commission’s preliminary recommendations include the following:

Moreland Commission on Utility Storm Preparation and Response
Preliminary Findings and Recommendations (January 7, 2013)
Recommendations relate to the following three areas:
1. Strengthen State Oversight of Utilities
2. Unify State Energy Programs and Policy
3. Restructure LIPA 
Public Service Commission Lacks Power and Oversight
The Public Service Commission is charged with overseeing New York utility companies but lacks real oversight
Limited performance of required utility operational and management audits: 
• Scaled back reviews of rate requests and service delivery
• Did not regularly review or approve utility storm plans before Hurricane Sandy
• Weak penalty authority is failing to deter poor utility service
• Does not regulate LIPA rates and service
Strengthen State Oversight of Utilities
1)      Authorize PSC to Impose Administrative Penalties for Violations of its Orders 
        • Right now, the maximum PSC fine is only $100,000 a day total for all violations 
        • Utilities must be found to have committed a “knowing” violation, which may be difficult to demonstrate 
Commission Recommends:  
• Increase penalties to ensure adequate deterrence - for example base penalty amount on .02% of gross revenue which would equate to about $2 million per day for Con Ed and about $750,000 per day for National Grid
• Lower burden of proof to “reasonable business” standard
• Require penalty money to be returned to impacted ratepayers
• Grant PSC explicit power to review fitness of utilities
• Give State explicit authority to revoke operating certificates
2)      Require PSC to regularly review and approve utility storm plans
        • Utility storm plans are reviewed by Department of Public Service (DPS) staff, not PSC 
        • PSC does not approve and does not monitor for compliance
Commission Recommends  
• Direct PSC to issue approval orders of utility storm plans with penalties for utilities that do not adhere to PSC recommendations
• Require PSC review of utility compliance with plan
3)      Strengthen PSC oversight and restore regular auditing of utilities management, operations, and rate increase requests
        • PSC has made only minimal use of its authority to conduct operational and management audits
Commission Recommends
 • Restore the Management and Operational Audit Unit
• Require management and operational audits at least every five years
• Require PSC to mandate implementation of reasonable audit recommendations
• Create a dedicated enforcement unit to help ensure utility compliance with laws, regulations and orders, which can be enforced through penalties
4)      Hire more trained staff at the Department of Public Service after years of reductions
        • Authorize DPS to fill up to 524 FTEs (FY 2012-13 Budget authorization) 
        • Additional 16 employees (508 to 524) could be deployed as follows: 
        • 8 engineers in the Emergency Management Unit (review of and compliance with utility emergency response plans) 
        • 6 auditors/engineers in a new Management and Operational Audit Unit 
        • 2 attorneys in the Compliance Unit (review utility compliance with laws, regulations, and orders)
5)      Unify management structure of DPS and NYSERDA
        • Right now, DPS and NYSERDA run competing and overlapping green energy programs leading to confusion, duplication, and waste 
        • NYSERDA and DPS draft separate disaster response plans with little coordination
Commission Recommends:
• Unify management of DPS and NYSERDA
• Synchronize clean energy program administration efforts to bolster both organizations’ ability to meet core functions
• Combine staff related to energy markets, policy and planning, and emergency response in a single office
Moreland Commission Recommendation (on LIPA)
The Moreland Commission favors privatization of LIPA as the best option
• Integrates ownership, management, planning, and operations
• Resolves accountability issues
• Transfers operations from State to private sector
• Improves decision-making process
• More cost effective than the “Expand State Authority” option
• Ends the originally intended transitional role of LIPA
• Ratepayers benefit from an Investor Owned Utility rate structure regulated by the PSC
Moreland’s Work Will Continue
• Will continue to look at LIPA and the other utilities operating in NY
• More public hearings in storm area and across the state
• Final report with additional recommendations issued in the coming months

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