I-Team: Main Contractor for LIPA Criticized by State Regulators

Long before Sandy hit New York, state regulators said the contractor hired by the Long Island Power Authority to fix and maintain electric service was out of touch with ratepayers and poorly managed, the I-Team has learned. 

LIPA pays a British company, National Grid, about $2 billion a year to help provide and maintain electric service to Long Islanders. In the New York City metro area, National Grid is better known for providing gas service, which is not part of the LIPA contract.
“People know that there’s LIPA. They don’t know National Grid,” said Nassau County Legislator Howard Kopel (R), vice chair of the Public Works Committee. “They don’t care about National Grid.”
As part of the contract, when a ratepayer calls LIPA to report a problem, he may be connected with a representative of National Grid. 

LIPA had three customer service representatives listed on its 2010 payroll of about 115 employees.
National Grid declined to say how many customer service representatives the firm employed during the storm. The utility also did not say how many workers it designated to repair electric lines after Sandy. In an email, National Grid spokesman Steve Brady said, “details on storm response of that nature – by contract – should come from LIPA.”
National Grid provides electric service to other parts of New York state. In 2009, the utility sought to raise the rates customers pay in upstate regions and filed the required documents with the Public Service Commission.
As part of the application evaluation, a staff member for Public Service Commission submitted testimony suggesting the British company “takes a hands-off approach” when it comes to operations in the U.S.
The testimony from Kathleen Tallmadge, a utility consumer program specialist, summarized an audit conducted by NorthStar, a private consulting company. In her testimony, Tallmadge pointed out that in 2010, National Grid had one board member with “experience in operating an energy utility in the U.S.”  

Tallmadge also suggested National Grid’s centralized management made it difficult for the utility to act nimbly when local problems crop up. “Decisions are made on a U.S. rather than a state-by-state basis,” Tallmadge wrote.
As part of the same review, the Public Service Commission analyzed expenses the company submitted and found they were unjustified.
Expenses included more than $50,000 in private school tuition for the children of National Grid employees as well as more than $2,000 to send a pet cat overseas and to bring a personal wine collection from England to the U.S.
"That's obviously deplorable,” said Kopel.
Brady told the I-Team the tuition, wine collection and other questioned expenses were not paid by ratepayers and that including them in the application to raise rates was an accounting error.
"The spending you're talking about was part of a very specific program that was paid for by the shareholders," said Brady. “At no time was that part of our rates. Customer rates would not have been lower if that program didn’t exist. Customer rates would not have been higher because of that program. It was entirely paid for by shareholders."
Brady says the accounting error has been corrected and over the last 18 months the company has taken steps to push back against criticism that British executives are hands-off and ill-prepared to run a utility in New York State. 
“The management structure of National Grid in the United States has changed fairly dramatically," said Brady.“To suggest that there is a hands-off approach doesn't recognize the current state of management structure at National Grid."
Brady said there are now two board members with experience operating utilities in the U.S.
Kopel believes National Grid’s performance following Sandy was abysmal, but said his frustration is directed primarily at LIPA, who is essentially National Grid’s manager.
“That is LIPA’s job,” said Kopel. “That is literally their entire job and they’re not doing it. It doesn’t take much convincing, because we have the evidence all around us.”
A LIPA spokeswoman declined to comment. 
The authority is not renewing the contract with National Grid, which expires at the end of 2013. At that time, PSE&G will take over maintaining Long Island’s power grid.
Brady said the impending contract expiration did not adversely affect the company’s performance in the aftermath of Sandy.
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