Municipalizing LIPA would be a big mistake


Converting the Long Island Power Authority to a public power utility from a private-public partnership is being considered by the State Legislature through a commission. This switch, in a process known as municipalization, would be a massive mistake.
Just ask residents of Boulder and Pueblo, Colorado, who overwhelmingly rejected ballot issues to municipalize. In fact, only a handful of communities nationwide have voted in favor of a municipal takeover of electricity in over a decade.
It’s usually a costly folly that rarely achieves the benefits proponents claim. What happens in reality should dissuade the Legislature from altering the LIPA public-private partnership.
Creating a municipal utility doesn’t necessarily:
• Bring lower electricity costs. In San Marcos and Palm Springs, California, for example, consultants’ cost savings estimates turned out to be wrong, to the detriment of consumers. Plus, while municipal utilities tend to charge residential customers less and businesses more, residents end up paying more anyway. Further, a study by a consulting firm found the costs passed on to ratepayers by municipal utilities often went up.

• Improve grid security. Municipal utilities are under cyber siege as their staffing shrinks, cybersecurity spending lags and their legacy systems are often outdated. In 2021, a cyberattack against the Oldsmar, Florida, water treatment facility nearly poisoned the water supply of almost 2 million people.
• Guarantee accountability to consumers or taxpayers. Investor-owned utilities are regulated by a state utility commission. When a blackout or brownout or other crisis occurs, such oversight is vital in order to determine what went wrong and how to fix it. Accountability of a municipal utility often proves less strict, and more subject to politics.
• Improve operations. Municipal officials and appointees frequently don’t have the expertise that investor-owned utilities possess, which can reduce reliability in areas where major storms and other weather-related events occur. For instance, when Winter Park, Florida, switched to a public utility, it wasn’t prepared operationally, and had to build that knowledge from the ground up.
• Offer the shared risk for ratepayers that investor-owned utilities do, with shareholders who shoulder risks with ratepayers.
Municipalization triggers other major problems. It costs a lot, is contentious, and takes a long time to happen, if it happens at all. In Corona, California, the direct buyout cost of its utility will exceed $300 million. Long Beach, California, rejected municipalization because of its $500 million price. The city of Pueblo, according to one estimate, would have lost nearly $8.5 million in taxes and franchise fees if it had municipalized its utility.
Failure took 13 years for a plan in Las Cruces, New Mexico, felled after dozens of lawsuits and many untold costs arose.
As well, only one in six attempted municipal utility takeovers succeeds, according to a report that studied 60 of them. Two later sold the utility back to the investor-owned utility. Investor-owned utilities cannot afford bloated budgets, but public utilities need not have the same capital discipline with taxpayer dollars.
LIPA customers should also be outraged by the poor job the legislative commission has done. Despite spending $2 million in taxpayer dollars to collect community input, the commission held none of three public hearings called for before the end of last September. It held no meetings during its first five months of existence, and didn’t produce a draft report by year-end 2022. It was expected this month.
The track record of municipalization is clear, and Long Island residents should not be fooled by the current attempts to municipalize the LIPA.

Wendy Hijos is the New York state director for the Consumer Energy Alliance.