Fight The Power: The Problems With LIPA and National Grid

Caithness Long Island, an efficient, new power plant in Yaphank

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That trade-off highlights another one of the paradoxes facing this public utility. It’s supposed to put its ratepayers’ interests ahead of the taxpayers, but meeting that priority has proven problematic. All told, LIPA pays about half a billion dollars in annual property taxes. Without that obligation, it could reduce its rates 20 percent, “taking us out of the top tier,” according to energy policy analyst and independent power industry consultant Harry Davitian, president of Entek Power Services, based on Long Island.

“In an alternate universe LIPA wouldn’t be paying that,” adds Davitian.

“LIPA is supposed to be a municipal utility concerned about ratepayers,” says Suffolk County Legis. Ed Romaine (R-Center Moriches). “Elected officials are supposed to be concerned about taxpayers.”

But few politicians have been willing to seize the initiative if it means that their own residents would have to pay more to support their local school districts.
Environmentalists and energy advocates wish that they would.

“LIPA is not here to support schools,” insists Esposito of the CCE. “Its role is to supply energy in the most cost-effective way and that’s what they should be doing. Is it fair that people from Bay Shore pay for Port Jefferson’s school system or people from Amityville are paying for Northport’s schools?”

“I think a lot of decisions that LIPA has made have been more politically driven than business driven,” said Bob Catell, former National Grid USA executive chairman, now co-chair of Stony Brook University’s Advanced Energy Research & Technology Center. “And maybe that hasn’t lent itself to addressing the real problems.… Now if they were a private utility, they would have been in court a long time ago looking to get those taxes reduced. I understand the burden it places on the towns, but why should all the ratepayers of Long Island be paying for those towns?”

Since last year, LIPA has been embroiled in court battles with the Towns of Huntington and Brookhaven over what the utility has to pay for assessments on its power plants. The utility has said it wants to reduce the assessments on the Northport and Port Jefferson facilities but would not seek refunds for past taxes. Last year, National Grid, a British-owned utility, which bought KeySpan’s plants for $11.8 billion in 2007, filed the lawsuits in state court contesting the assessed property taxes on behalf of LIPA. In May, Huntington and Northport-East Northport School district countersued. According to news reports, National Grid pays $65.5 million annually for the Northport plant and $26.1 million for the Port Jeff facility. The tax bills are passed along to LIPA, adding to its overall expenses.

The impact is widely felt, as owners of homes and businesses here can attest.

“Our property taxes are higher than other regions of the country,” says Kevin Law, former president and CEO of LIPA, now president and CEO of the Long Island Association. “Another reason that the cost of doing business here is high is our utility costs. Thirty cents of every dollar we give to LIPA goes to debt service and some type of taxes, primarily property taxes. If those were more in line with what other utilities paid, our utility costs wouldn’t be one of the highest in the country. It’s a significant factor when folks are looking either to stay or expand or relocate.”