Pulling the Plug
Shoreham today, at least in energy circles, is synonymous with debacle—a nuclear power plant that became a costly albatross for LILCO as construction expenses mushroomed from $250 million to $6 billion before it was finally completed. By the 1980s, LILCO, observers say, was unable, or unwilling, to adequately invest in its distribution and transmission infrastructure.
“Shoreham was just a big giant sink that was sucking cash,” said an energy expert who asked not to be identified given his close ties to the power supply business. “Basically they were a bankrupt utility.”
The Public Service Commission, the state regulatory agency charged with oversight of the private utility, kept approving rate increases to keep the company afloat, infuriating LILCO customers and fueling political opposition. On one front, citizens tried to keep the reactor from getting licensed on the grounds that if there were a radioactive mishap, it would be impossible to evacuate the Island. As Amper, the environmentalist, put it, speaking for anyone ever stuck on the LIE: “You can’t evacuate Long Island on a Sunday afternoon, let alone in the middle of a nuclear accident!”
Gov. Mario Cuomo stepped into the ring, eventually deciding that no plan would work in an emergency, whether the radius was drawn 10, 20 or 50 miles from Shoreham’s reactor, and that led to LIPA eventually taking over LILCO. Interestingly, across the Sound, Waterford Dominion just completed its mandated evacuation at its Millstone reactor last month, a drill conducted once every six years. All 1,085 employees and about 400 contract workers left the facility without incident within an hour and a half. In the event of a real emergency, such as the recent near-meltdown in Japan, the U.S. government warned citizens to stay 50 miles away from the crippled facility. If that geometry of safety were applied to Millstone, then the North Fork and Brookhaven would be affected.
Suffolk County legislators had tried to take LILCO over in 1986, with the goal of giving ratepayers, not bondholders and stock investors, ultimate control, but the state Court of Appeals overruled the county. Perhaps having a nuclear reactor in their backyard focused their minds, but Suffolk political leaders have continually been much more involved in utility issues than their Nassau counterparts, according to Law of the LIA. The Nassau County Legislature hasn’t even held a committee meeting on energy issues since the Republicans took over the majority in 2010, whereas the Suffolk legislature has set up a special oversight committee. Perhaps another driver of that disparate interest is that Suffolk residents have to pay a 2.5 percent tax on their utility bill to make up for Shoreham’s over-assessed property taxes.
In any event, LIPA’s takeover of LILCO continues to rankle, particularly because it burdened LIPA ratepayers with the Shoreham’s multi-billion-dollar liabilities, and let the shareholders and the bondholders off the hook. The deal cut electric rates 20 percent because it allowed LIPA to gain a tax-exempt status and pay less for borrowed money, but it “saddled us with a debt that we never wanted in the first place,” says Sheldon Sackstein, chairman of Action Long Island and a member of Suffolk’s LIPA oversight committee. “All the benefits went to private parties and ratepayers got stuck with the bills.”
Richie Kessel, LIPA’s first chairman who now heads the New York Power Authority, which oversees a fourth of the state’s energy supply, said it’s pointless arguing over the deal. What’s done is done.
“It’s all about keeping the lights on,” Kessel says.
His priorities at LIPA were to reinvest in the system, improve the delivery of electricity, and add megawatts to the power supply. He did that with two new underwater cables, one from Connecticut, the other from New Jersey, and overcoming his own opposition to contract with Caithness, an independent energy provider, for a highly efficient new power plant in Yaphank.
“I’m very proud of the work I did at LIPA and I’m sure that it will stand the test of time,” Kessel tells the Press.
Hervey, LIPA’s COO, says that LIPA’s rates are better than they would have been under LILCO.
“Our increases are still less than the rate of inflation and less than 3 percent per year overall,” he explains.
But energy advocates like Sackstein and others worry that LIPA, in its haste to meet its self-imposed September deadline, might be setting itself up for another Shoreham situation, if it’s not careful. Sackstein doesn’t want to extend the management services bidding but he does want LIPA to “stop the rush to sign off on the deal.”
He said that Brooklyn Union Gas took over “almost overnight” from LILCO, forming KeySpan, and “the only reason it worked,” Sackstein recalled, is that “Local 1049 was on the job. When Brooklyn Union Gas came out here, they couldn’t have found the light switch.”
Vanessa Baird-Streeter, a LIPA spokeswoman, explains the sense of urgency.