Relates to the public service department undertaking a comprehensive and regular management and operations audit of the Long Island power authority; repealer

Summary of provisions

Section 1 of the bill names the bill the Long Island power authority oversight and accountability act.

Section 2 would amend § 3 of the PSL to require the Department of Public Service ("DPS") to undertake a comprehensive and regular management and operations audit of LIPA. DPS would have discretion to have such audit conducted by an independent consultant chosen by and under such terms negotiated by the Department, but through a contract entered into between the independent auditor, LIPA and DPS. The process used by DPS to choose the independent auditor would be similar to the process it currently uses under PSL § 66(19), as applied to audits of investor-owned utilities ("IOUs").

Section 3 would add a new subdivision (bb) to § 1020-f of the public authorities law ("PAL") - divided into four separate paragraphs - to establish the substantive requirements and procedures to be followed with respect to the comprehensive and regular management and operations audits of LIPA.

Paragraph 1 would require LIPA to cooperate with DPS and/or the independent auditor and would provide the auditing standards that must be followed in undertaking such audit. In particular, the auditor would be required to review and evaluate LIPA's overall operations and management, including the Authority's operations and management in the context of its duty to set rates at the lowest level consistent with the standards and procedures provided in PAL §1020-f(u). The auditor would also be required to examine a non-exclusive list of six audit topics related to LIPA's operations and management.

Paragraph 2 would establish the frequency of the audits, with the first audit being initiated immediately and in a manner and to an extent that is practicable in the context or LIPA's transition to a new management service structure. The second audit would be initiated no later than December 15, 2015 and all additional audits would be initiated at least once every five years thereafter. Paragraph 2 would also require public statement hearings to be held in both Nassau and Suffolk Counties at the beginning of each audit process.

Paragraph 3 would require each audit to be completed within eighteen months of initiation, with a standard for an extension of time, and for the audit report to be provided to the LIPA Board, DPS and certain public officials, and be posted on LIPA's website. Paragraph 3 would also provide the LIPA Board with authority to make a preliminary determination with respect to whether any finding or recommendation contained in such audit report is inconsistent with the Authority's sound fiscal operating practices, any existing contractual or operating obligation, or the provision for safe and adequate service ("determination of inconsistency").

Paragraph 4 would establish the process that the LIPA Board must follow in providing for public review of such a preliminary determination of inconsistency, if and when one is made, and the time period associated with such review. The LIPA Board would be required to hold a public hearing with respect to any preliminary determination of inconsistency, at which DPS or the independent auditor would be required to present the basis for its determinations. The LIPA Board would be required to hold a public hearing with respect to any preliminary determination of inconsistency, at which DPS or the independent auditor would be required to present the basis for its findings and recommendations and the Board to present the basis for its determination of inconsistency. Paragraph 4 would also provide the LIPA Board with authority to make a final determination of inconsistency, which would be subject to any applicable judicial review proceeding, including review under article 78 of the civil practice law and rules.

Section 4 would amend Executive Law § 94-a(4)(b) to provide the Utility Intervention Unit within the Department of State's Division of Consumer Protection, with authority to accept and investigate

complaints made by LIPA customers, attempt to mediate such complaints where appropriate, and to refer such complaints to the appropriate state or local agencies.

Section 5 would repeal a chapter of the laws of 2011 amending the public service law ("PSL"), as proposed in legislative bill numbers S.2581 and A.3614, related to subjecting to review and approval by the Public Service Commission ("PSC") any proposal by LIPA to increase customer rates exceeding two and half over a twelve month period.

Section 6 would make the bill effective immediately upon enactment into law.

Existing law

This is a new bill; LIPA is currently not required under its enabling statute to undergo a management and operations audit.

Statement in support

There is a present and continuing need for LIPA's internal standards and procedures to become more transparent and to ensure adherence with best-industry practices. There is also a need for LIPA to maximize the efficiencies of its management and operations, with the recognition that implementation of such efficiencies provides for the most economical electricity rates consistent with LIPA's obligations under its enabling statute. The purpose of this bill is to meet these dual needs by requiring LIPA to undergo a comprehensive and regular management and operations audit that is open to public review and comment. This would subject LIPA's internal standards and procedures to more public scrutiny in a manner that promotes improvement of LIPA's management and operations to the benefit of its customers.

The comprehensive audit would be similar to the audits currently undertaken by the Public Service Commission under PSL § 66(19), but would be subject to a more inclusive public comment and review process. The public nature of the process (in the new §1020-f(bb)(2), (4)), and in particular the requirement that the LIPA Board make a public presentation of any determination of inconsistency, would ensure that the Board's final decision with respect to adopting the audit's findings and recommendations is held to a more rigorous standard than currently exists for any other utility in the state. The bill clarifies, moreover, that any final determination of inconsistency would be subject to court review by any effected party. This transparency is balanced with ensuring that the LIPA Board retains the authority to implement the audit recommendations, therefore preserving the Board's independent ratemaking authority, consistent with LIPA's enabling statute. The entire process that would be imposed under the bill balances the need to find efficiencies for the benefit of ratepayers against LIPA's continuing statutory and contractual obligations.

The first audit of LIPA, to be initiated immediately upon enactment of the bill into law, would be undertaken in a manner that acknowledges that the Authority is currently transitioning to a new management service structure and entering into a new management service agreement projected to be completed by January 1, 2014. Among other things, the bill is intended to ensure that the new structure is operated in an efficient and cost-effective manner.

In response to the concerns that have been raised by LIPA's customers regarding the lack of a sufficient consumer advocate, the bill would also give the Utility Intervention Unit ("UIU"), within the Department of State's Division of Consumer Protection, with specific authority to investigate any complaints made by such customers and mediate such complaints consistent with LIPA's tariff, and to refer such complaints to appropriate state and local agencies for further review. The new authority granted the Department of State would augment LIPA's existing program.

Prior legislative history

This is a new proposal.

Budget implications

None.

Effective date

The bill would become effective immediately.