New Yorkers Challenge LIPA, FEMA over Power Outages

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By Jen Alic of Oilprice.com

Hurricane Sandy isn’t done with New York. Having revealed the unaccountable weakness of the local authorities to deal with the disaster, now she’s rolling heads.

The past week has seen the resignation of the chief of the Long Island Power Authority (LIPA), the news that some in the Rockaways and Long Island may be without power until Christmas, and questions that are making things uncomfortable for Governor Mario Cuomo.


Effective 31 December, LIPA COO Michael D. Hervey has resigned his position after 12 years of service, taking fall for the authority’s ability to restore power following Hurricane Sandy.

The thing about Hervey is this: He has been serving as acting CEO of LIPA since the resignation of his predecessor in 2010. He was never elected or approved by the Senate—nor was his position questioned when LIPA also underperformed in the wake of Hurricane Irene in 2011. He is an easy scapegoat.

Another head to roll will be New York Governor Cuomo. While Cuomo has promised to hold utility companies and their management accountable for poor performance, he won’t be able to deflect blame entirely. 

For one thing, LIPA is Cuomo’s father’s creation, and he gets to make nine of the 15 appointments to the board of trustees. The necessity of a massive restructuring of LIPA is Cuomo’s responsibility and the removal of Hervey will not make much of a difference. It will not go unnoticed that Cuomo allowed LIPA to continue with necessary changes and to build debt that was hidden from the public.

As for LIPA itself, this might be the beginning of the end. It was never intended to be a permanent operation—only a transition. In the meantime, some say the disgraceful performance of LIPA is the result of a cumbersome bureaucracy. And if bureaucracy is the problem, then it’s only going to get worse. As of 2014, another layer will be added when the Public Service Enterprise Group, Inc. (PSEG) takes over the day-to-day operation of LIPA’s electric utility business.

New Yorkers want action now, or preferably, yesterday. But even trying to get ahold of LIPA these days is challenging, and most calls will end with an automated response along the lines of “try again later”. At the height of Hurricane Sandy, and even two weeks after it struck, this message was a bit frustrating.

According to Senator Jack Martins--who has taken on the Hurricane Sandy cause for New York wholeheartedly (if not opportunistically)—the LIPA board of trustees discussed Hurricane Sandy for exactly 39 seconds when the storm hit. “They didn’t trim enough trees prior to the storm, their service maps are outdated; their wiring is antiquated; they never installed a monitoring system; their communication with customers stinks.”

A New York Times’ “investigation” into the issue revealed that the LIPA board spent so little time discussing Hurricane Sandy because “they believed a plan was already in place.” One isn’t really sure how to respond to that. Certainly if a plan were already in place the LIPA board would have known about it—if not in fact created the plan itself?

Restructuring LIPA is easier said than done, says Martins: “The legacy costs LIPA has carried have merely kicked the can down the road – the billions borrowed still have to be paid and that has to be factored into any future LIPA reincarnation.” It’s $7 billion in debt right now—and counting.

None of this is comforting to Long Islanders, who pay some of the highest rates in the country. Here’s where things stand: When Sandy hit on 29 October, more than 1.1 million LIPA customers were cut off from power. It took over two weeks, until 14 November, to restore most of that power. It also took some 15,000 workers to do it, as well as the replacement of over 4,500 poles and 2,100 transformers, and the repair of 400 miles of wire and 44 substations. Up to 14 November, authorities estimate that it cost as much as $850 million to respond and repair for LIPA and the National Grid. The costs will continue to mount.

And here’s the kicker: While 99% of LIPA customers “who can safely get power” have seen service restored, another 35,000 may be without power until Christmas. These unfortunates are largely in the Rockaways sections of Queens, where Hurricane Sandy did some of her worst damage. Here, property repairs will have to precede restoration of power.

In an interview with CNN, NYC Councilman James Sanders said: “When I raised the question to the man and said, how soon will everyone have power, they wouldn't give me an answer, and I said, well, can we say November? Can we say December? How about Christmas? At that point they said, it is possible.”

The Rockaway Peninsula is a strip south of the John F. Kennedy International Airport, and residents there were largely abandoned by FEMA, which took 10 days to show up after Hurricane Sandy hit. Rockaways residents are understandably in an anti-acronym mood, having been left in the dark first by FEMA and then by LIPA.

Long Islanders, too, are outraged, with some 1,000 people outside the Rockaways still without power at the time of writing. 

Of course, it’s a great argument for privatization. But this argument also ignores the highly criticized response of private utilities to Hurricane Irene in 2011 and other severe weather incidents. While private companies are not hindered by bureaucracy, they have proven hindered by their lack of desire to spend money doing basic things like trimming trees. 

But with LIPA, the failure smacks of patronage, and residents of the Rockaways in particular are latching onto to the utility managers that they are sure received their appointments through political connections—courtesy of Cuomo—rather than based on their knowledge and experience.

Source: http://oilprice.com/Energy/Energy-General/New-Yorkers-Challenge-LIPA-FEMA-over-Power-Outages.html



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: News Headlines , Business , Commodities

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