New York's powerful Moreland Commission recommends eliminating the state's Long Island Power Authority and replacing it with a private company.
The commission says LIPA was unprepared for Sandy, then inept in its response.
Gov. Andrew Cuomo, who appoints leaders of the LIPA board, would have to approve privatization.
The commission, created by Cuomo after sharp criticism of utilities in restoring power to more than 2 million customers, issued its initial report Monday.
Under state law, the Moreland Commission can be created by a governor to investigate public concerns. Cuomo said utilities appeared woefully unprepared for the storm, saying they even lacked a stockpile of power poles to replace those broken by falling trees.