Make LIPA Fully Public

Section 1. Short title. This act shall be known and may be cited as the "Long Island power authority public power act".

§ 2. The purpose of this act is to facilitate transition of the Long Island power authority ("LIPA") into a full public power model through modifications of its authority to manage, operate and control utility operations in its service area as well as to modify its statutory, fiduciary, financial and related obligations, so that LIPA would fully operate the electric grid in its service area without the added expense and lack of accountability that comes from contracting out the operations of LIPA's grid to a private, investor-owned utility, and to give LIPA the flexibility to use the PEO model as a secondary alternative to the LLC model.

§ 3. Title 2 of article 9 of the public authorities law governs the roles and responsibilities of boards of public authorities. Through adoption of the act and the amendments made by part A of chapter 173 of the laws of 2013, the board's responsibilities were modified from those afforded to the boards of other New York state public authorities. LIPA is the only utility in the nation that is operated under a third-party management model. This model has repeatedly failed its customers. There has been a lack of transparency, oversight, and accountability. This failure has been most dramatically evidenced in the unacceptable storm response by LIPA and its third-party service contractors during Superstorm Sandy in 2012 and Tropical Storm Isaias in 2020. In adopting

EXPLANATION--Matter in italics (underscored) is new; matter in brackets

[ ] is old law to be omitted.

LBD13880-03-4

section 83-n of the legislative law, the legislature determined that a better management alternative for LIPA must be implemented. The legislature proposed implementation of the original vision for LIPA intended by chapter 517 of the laws of 1986, as a publicly owned power company. Thus, amendment of title 1-A of article 9 of the public authorities law is required to allow LIPA's board to function with full authority under title 2 of article 9 of the public authorities law and as intended in chapter 517 of the laws of 1986. LIPA's board must have the legislative authority to effectively oversee LIPA's public power operations. Amendment of the public authorities law, the public service law and the state finance law are necessary to aid in the transition to a fully public power model.

§ 4. Section 1020-a of the public authorities law, as added by chapter 517 of the laws of 1986, is amended to read as follows:

§ 1020-a. Declaration of legislative findings and declarations. The legislature hereby finds and declares that:

[Constantly escalating and excessive costs of electricity in the counties of Suffolk and Nassau and that portion of the county of Queens served by the Long Island lighting company (hereinafter referred to as the "service area") pose a serious threat to the economic well-being, health and safety of the residents of and the commerce and industry in the service area.

There is a lack of confidence that the needs of the residents and of commerce and industry in the service area for electricity can be supplied in a reliable, efficient and economic manner by the Long Island lighting company (hereinafter referred to as "LILCO").

Such excessive costs and lack of confidence have deterred commerce and industry from locating in the service area and have caused existing commerce and industry to consider seriously moving out of the service area.

The decisions by LILCO to commence construction of the Shoreham nuclear power plant and thereafter to continue such construction were imprudent.

The investment of LILCO in the Shoreham nuclear power plant has created significant rate increases, straining the economic capabilities of ratepayers in the service area, and likely will require further substantial rate increases if such plant is placed in service.

It is uncertain whether the Shoreham nuclear plant ever will go into commercial service, or if it does whether its reliability, cost of construction, operation and maintenance will be such as to provide sufficient, reliable and economic electric service to ratepayers in the service area. The very substantial financial strain of the investment in the Shoreham nuclear plant has required LILCO to suspend dividends on its common and preferred stock, severely threatening the continued economic viability of LILCO.

For all the above reasons, a situation threatening the economy, health and safety exists in the service area.

Dealing with such a situation in an effective manner, assuring the provision of an adequate supply of electricity in a reliable, efficient and economic manner, and retaining existing commerce and industry in and attracting new commerce and industry to the service area, in which a substantial portion of the state's population resides and which encompasses a substantial portion of the state's commerce and industry, are hereby expressly determined to be matters of state concern within the meaning of paragraph three of subdivision (a) of section three of article nine of the state constitution.

Such matters of state concern best can be dealt with by replacing such investor owned utility with a publicly owned power authority. Such an]

LIPA was created by the Long Island power authority act in nineteen hundred eighty-six ("LIPA act") in response to growing dissatisfaction with the Long Island lighting company ("LILCO"), an investor-owned gas and electric utility that provided service to Long Island and the Rockaways. Deteriorating confidence in LILCO's ability to provide affordable and reliable rates and the controversial decision to build the Shoreham Nuclear Power Plant created a situation that threatened the economy, health, and safety in LILCO's service area. As a result, LIPA was granted broad powers to operate as a publicly owned power authority to provide safe and adequate electrical service at rates that would benefit ratepayers in the service area.

However, LIPA never established itself as a true "publicly owned power authority" as originally envisioned by the legislature. Rather, since nineteen hundred ninety-eight, LIPA has opted for a third-party management model whereby LIPA contracts its responsibility to manage the utility to a private, investor-owned utility company.

LIPA is the only utility in the nation that is operated under such a third-party management model. The model's failures in efficiency, reliability, transparency, oversight, and accountability have been well documented over the years. In adopting section eighty-three-n of the legislative law, establishing the commission on the future of LIPA and charging it with the responsibility to present the legislature with "the specific actions, legislation, and timeline necessary to restructure LIPA into a true publicly owned power authority," the legislature determined that a better management alternative for LIPA must be implemented.

The legislature finds that a public power authority can best accomplish the purposes and objectives of this title by [implementing, if it then appears appropriate, the results of negotiations between the state and LILCO. In such circumstances, such an authority will provide] providing safe and adequate service at rates which will be lower than the rates which would otherwise result and will facilitate the shifting of investment into more beneficial energy demand/energy supply management alternatives, realizing savings for the ratepayers and taxpayers in the service area and otherwise restoring the confidence and protecting the interests of ratepayers and the economy in the service area. Moreover, [in such circumstances the replacement of such investor owned utilities by such an authority will result in] a public power authority will result in an improved system and reduction of future costs and a safer, more efficient, reliable and economical supply of electric energy. The legislature further finds that such an authority shall utilize to the fullest extent practicable, all economical means of conservation, and technologies that rely on renewable energy resources, cogeneration and improvements in energy efficiency which will benefit the interests of the ratepayers of the service area.

§ 5. Section 1020-b of the public authorities law, as added by chapter 517 of the laws of 1986, subdivision 11 as amended by chapter 381 of the laws of 1987, subdivision 12-a as added by chapter 506 of the laws of 1995, and subdivisions 23 and 24 as added by section 3 of part A of chapter 173 of the laws of 2013, is amended to read as follows:

§ 1020-b. Definitions. As used or referred to in this title, unless a different meaning clearly appears from the context:

1. "Acquire" means, with respect to any right, title or interest in or to any property, the act of taking by the exercise of the power of eminent domain, or acquisition by purchase or otherwise.

2. "Act" means the Long Island power authority act, being title one-A of article five of the public authorities law, as added by [this title] chapter five hundred seventeen of the laws of nineteen hundred eightysix, and as subsequently amended.

3. "Authority" means the Long Island power authority created by section one thousand twenty-c of this title.

4. "Board" means the board of trustees of the authority.

5. "Bonds" or "notes" mean the bonds, notes or other obligations issued by the authority pursuant to this title.

6. "Community stakeholder board" means a committee designed to supplement the expertise and experience of the board to promote citizen involvement and ensure balanced representation from its service area.

7. "Fair market value" means the value of property, real, personal or mixed, which would be obtained in an arm's length transaction between an informed and willing buyer under no compulsion to buy, and an informed and willing seller under no compulsion to sell.

[7.] 8. "Federal government" means the United States of America and any agency or instrumentality, corporate or otherwise, of the United States of America.

[8.] 9. "Final determination" or "finally determined" means a judicial decision (i) by the highest court of competent jurisdiction, or (ii) by a court of competent jurisdiction from which no appeal has been taken and the time within which to appeal has expired.

[9.] 10. "Governing body" means, with respect to any municipality, the body having charge of the fiscal affairs of such municipality.

[10.] 11. "LILCO" means the Long Island lighting company, its subsidiaries and their successors and assigns, other than the authority.

[11.] 12. "Municipality" means any city, town, village, county, municipal corporation, district corporation, district or other political subdivision of the state.

[12. "OCLD" means the original cost of assets, less depreciation.

12-a.] 13. "Project" means an action undertaken by the authority that:

(i) Causes the authority to issue bonds, notes or other obligations, or shares in any subsidiary corporation, or

(ii) Significantly modifies the use of an asset valued at more than one million dollars owned by the authority or involves the sale, lease or other disposition of such an asset, or

(iii) Commits the authority to a contract or agreement with a total consideration of greater than one million dollars and does not involve the day to day operations of the authority.

[13.] 14. "Prudent utility practices" at a particular time means any of the practices, methods, and acts, which, in the exercise of reasonable judgment in light of the facts (including but not limited to the practices, methods and acts engaged in or approved by a significant portion of the gas or the electrical utility industry, as the case may be, prior thereto) known at the time the decision was made, would have been expected to accomplish the desired result at the lowest reasonable cost consistent with reliability, safety and expedition. Prudent utility practice is not intended to be limited to the optimum practice, method or act, to the exclusion of all others, but rather to be a spectrum of possible practices, methods or acts. In evaluating whether any matter conforms to prudent utility practice, the parties shall take into account the fact that the authority is a corporate municipality of the state with the statutory duties and responsibilities thereof.

[14.] 15. "Real property" means lands, structures, franchises and interests in land, including lands under water and riparian rights, and any and all other things and rights usually included within such term, and includes also any and all interests in such property less than full title, such as easements, rights of way, uses, leases, licenses and all other incorporeal hereditaments and every estate, interest or right, legal or equitable, including terms for years and liens thereon by way of judgments, mortgages or otherwise, and also all claims for damages for such real estate.

[15. "RCNLD" means the reproduction cost of new assets, less depreciation.]

16. "Security" means any note, stock (whether common or preferred), bond, debenture, evidence of indebtedness, transferable share, votingtrust certificate or, in general, any interest or instrument commonly known as a "security", or any certificate of interest or participation in, temporary or interim certificate for, receipt for, or warrant or right to subscribe to or purchase any of the foregoing.