Great Neck North High School’s Junior Players presented “Urinetown,” a satiric musical that presents a dystopian vision of society facing deprivation of resources and under the thumb of corporatocracy.
In other words, Detroit.
Or you can say it is what is happening to the U.S. Postal Service, public education, Nassau County sewage treatment, Long Island Bus, and next on the block, Long Island utilities (LIPA).
The musical showed in a flippant, harmonic way what is actually happening with as corporations amass corporate cash and take over the body politic facilitated by the Supreme Court’s sensationally undemocratic Citizens United decision. In other words, no laughing matter.
The solution – as the musical so drily (or drolly) showed – is not to make “free” or to socialize everything, but the lesson to be learned is what happens when government is no longer responsible to the people, but to corporate masters.
Which brings us to LIPA.
What is happening to LIPA is not unlike what is happening to public education and to the post office, where government (doing the bidding of corporations who see big dollar signs), first set up the structures and rules that guarantee failure by that public entity while “private” entities are allowed to “flourish” because they are unrestrained by the very mandates put on public entities.
In other words, truly public services are set up to fail.
The 2006 Republican-dominated Congress did this to the U.S. Post Office, imposing an outrageous and impossible mandate that no other government agency or private business has to meet: funding retirement benefits for 75 years out (in other words, paying the retirement benefits for people who have not yet been born). That mandate accounts for $11 billion of the $15 billion deficit of the USPS – why it defaulted on its obligations this year – and the rest of it can be accounted for the limits imposed on USPS operations.
Now take LIPA. Let’s remind ourselves, shall we, how LIPA came about: it was the failure of the Long Island Lighting Company, a private company (and yet, a descendent company, National Grid operates and maintains LIPA’s transmission and distribution system; and in 2014, another private company, PS&G will be taking over billing functions from LIPA.)
LIPA is more of a board of directors that sets policy and direction, presumably on behalf of and for the benefit of ratepayers. Technically it owns the infrastructure – the transmission lines, the power plants.
Under LILCO, Long Islanders paid the highest utility rates in the country and had some of the most inefficient and antiquated infrastructure. Then the company had the great idea to build a nuclear plant in the middle of highly populated island with no way to escape a nuclear disaster. What could go wrong?
What went wrong is that the plant never opened. But instead of LILCO declaring bankruptcy and letting the government take over, LIPA was created to assume the $7 billion of Shoreham debt so that it could leverage the advantage of being able to issue tax-exempt debt and being eligible for federal grants.
In other words, LIPA was created to take over the debt. (Sound familiar? It’s the same with Fannie Mae and Freddie Mac, where private companies get the profits but taxpayers assume the debt).
Indeed, the main impediment to privatization is what happens to the $7 billion in debt, which was shuttered before it ever operated.
What’s odd about though is that LIPA still owes $7 billion in Shoreham debt and ratepayers are still paying, and our utility rates are still among the highest in the country.
Where is the money that we have been paying to pay down the debt? Who do we pay the debt to?
And why is it that trillions of dollars of toxic assets that the banks and AIG chalked up after the 2008 financial collapse – all those credit-default swaps based on worthless mortgages – somehow managed to disappear. Poof. Those banks’ balance sheets weren’t saddled with the trillions of debt and they now are posting record profits.
So why did LIPA get saddled with the Shoreham debt to begin with? Why wouldn’t LILCO have declared bankruptcy and erased the debt? And by the way, the federal government insures nuclear plants, so once again, why is a tiny population of Long Islanders forced to bear the cost of a $7 billion plant. No one has answered this question.
No one is denying that LIPA’s management and management structure (two different things) are “dysfunctional,” as the Moreland Commission found in placing blame squarely on LIPA for all the inordinately long power outages suffered because of Superstorm Sandy (I was at the Moreland hearing at SUNY Old Westbury and it was more of a kangaroo court with the commission only looking for negative remarks; when the LIRR President Helena Williams had good things to say about how well LIPA coordinated with LIRR, the commissioners discounted her statement and probed to get her to say all the bad things that LIPA did).
Gov. Andrew Cuomo has seized on the Moreland Commission recommendations to push a plan to privatize LIPA. Or perhaps the Moreland Commission tailored their findings to Cuomo’s agenda.
And yet New York Power Authority, the nation’s largest state electric utility and a government authority, is not dysfunctional. In fact, the NYPA President & CEO Gil C. Quiniones testified to the Moreland Commission all the things that were going through his mind, and all the actions he was taking as he was driving down to Long Island from upstate as Sandy was set to hit Long Island.
The moral of that story is that individuals matter. Who is actually serving in leadership and management functions matter. It isn’t that government authority is necessarily bad, or private company management structure is necessarily good.
LIPA has had no CEO at the helm for about two years and it seems that the rest of its senior management have all resigned after Sandy as well they should have. LIPA has been a dumping ground for political patronage. the responsibility for that falls on Gov. Cuomo.
As a result, National Grid assumed emergency management control as this latest storm of historic proportions hit Long Island this past weekend.
So is privatization the answer to Long Island’s utility problem?
Many are skeptical.
The things that are essential for living like water supply, energy supply, sewage treatment (I would add health care) should not be under private control with a profit incentive and a fiduciary duty to shareholders rather than users, especially private control that is a monopoly, as a utility is. These are resources and infrastructure that the people should own and control.
We have seen this with water supply.
Remember Citizens Water Supply Company that used to operate in Great Neck? You probably don’t. They had an incentive to sell as much water as possible, not to promote conservation. A private company does not have an incentive to treat for chemicals and toxins beyond the minimum mandated by a regulatory agency (arsenic anyone?), whereas the Great Neck North Water Authority, which is operated by the villages and the town, treats our water to a standard exceeding federal requirements.
Enron made a fortune pushing energy prices up and down, controlling supply and manufacturing electricity shortages so that they could manufacture profits instead. They made billions while Californians suffered (and laughed about it, too).
Left to their own devices, private companies will do whatever they need to do to maximize profits – look at the gun manufacturers who could voluntarily stop producing assault weapons, or movie and video game companies that produce blood-and-gore for entertainment while contributing to a culture of violence. You can look to any category of capitalism to see egregious abuses unless there are government regulators to rein them in.
Private companies are no more innovative or efficient than public ones and do not have a particular “magic” about management, either. Companies typically go for years without making any profit, and most go bankrupt or go out of business – often leaving taxpayers on the hook for covering pensions and the like. And some public services, like public transportation, are never solely self-supporting.
“LILCO was a private monopoly over a public necessity and it didn’t work,” commented Nassau County Legislator Dave Denenberg (D-Merrick), who opposes privatization and organized a Disaster Response Taskforce after Sandy. “The legacy of LILCO that we have the highest rates in the country, Shoreham debt, and infrastructure that hadn’t been improved for decades
“The folly of private monopoly,” he said, “is that because it had a monopoly over a necessity, LILCO never considered the interests of ratepayers, which were Long Islanders – and only cared about shareholders.”
“Monopolies maximize profit at the expense of infrastructure, public benefit – that’s why we have antitrust laws, yet when you look at public utilities, it is a totally flawed concept that Public Service Commission oversight will somehow protect them. Tell that to the people paying American Water rates.”
“The Shoreham debt should have been the [LILCO} shareholders debt – The idea that when LILCO was taken over, their shareholders got a significant return underwritten by LIPA and LILCO ratepayers who got stuck with the debt.”
Long Island should be making an investment in regionally based, renewable power-generating sources.
For example, North Hempstead should be able to generate a certain amount of its own electricity needs through solar panels on government buildings, on schools, on shopping centers; it should have wide-scale bio-diesel production such as Great Neck Water Pollution Control District has done on a very small scale. Some coastal municipalities can probably take advantage of hydro-power using small turbines in the water – I’ll bet the Saddle Rock gristmill could even be revived into an energy mill.
Solar energy isn’t just a means towards energy sustainability for Long Island, but is actually a growth industry for Long Island.
“Long Island has more solar distributors than any place,” Denenberg noted. “We have a lot of companies that distribute and install. One of the biggest economic drawbacks about solar is that we import the equipment – so distributors have to go to foreign manufacturers.”
On the other hand, why can’t Long Island – which once had a proud manufacturing heritage in aerospace – manufacture solar equipment? “This is a natural setting for manufacture,” Denenberg said. “We are constantly talking about high tech and jobs on Long Island. We could become a center of American solar production.”
Why stop there? Long Island shouldn’t just be a manufacturer of solar panels but also new generation high-storage batteries which, after all, are key to renewables. We should also pioneer transmission systems that can solve the problem of the loss of energy from, say, wind turbines 12 miles offshore.
Believe it or not, LIPA is a national leader in renewable energy – with its solar array at Brookhaven and its Clean Solar Initiative which was New York State’s first feed-in tariff, whereby residential and businesses that have solar arrays can sell excess energy back to the utility. And LIPA is part of a consortium with ConEd and NYPA to pursue off-shore wind in the Atlantic.
LIPA began by purchasing up to 50 megawatts of solar generation on customers premises; then just a few months ago, said it would purchase 100 megawatts more – effectively tripling the program.
“But there needs to be more,” said Kim Teplitzky, associate press secretary of the Northeast & Mid-Atlantic Sierra Club Beyond Coal Campaign. “The commitments we want to hold LIPA to are to move forward in 2013 to procure 280-300 megawatts of renewable energy.
Now LIPA is stuck in limbo. It has no real management. How does it go forward with any meaningful project to develop offshore wind energy, for example?
Sierra Club was already upset that LIPA seemed to pull back from any robust development of renewables when it signed a 20-year contract with National Grid (and committed to building a new natural gas-powered plant), basically resigning to a miniscule amount of Long Island’s electricity needs to be generated from clean, renewables, instead of clean, renewables generating the majority.
Now while not having a position yet on the privatization proposal, Sierra Club, is concerned that LIPA will be able to forge ahead with commitments for renewable energy programs.
“My biggest concern is if we move forward to private model, what happens to renewable energy?” Teplitzky said. “ If all this work we’ve done, all this fighting we’ve done to get LIPA off its dependence on fossil fuels – still 80 percent of our power – how vulnerable.”
The question becomes, how is it better to break it apart and invite private investors, and let a board of the biggest investors make decisions, instead of a board that is ostensibly responsible to ratepayers, how is that better?
LIPA approach to renewables falls under the model of public-private partnerships, where government facilitates and even invests (using a host of tools including tax incentives, low-interest loans and seed money) and, as Cuomo has proposed in his State of the State message, fostering research and development collaborations with academia that work their way into business applications.
Cuomo has proposed an ambitious agenda to make New York a leader in renewable energy, including extending the New York Sun Solar Jobs program at $150 million annually for 10 years to increase solar panel installations in homes and businesses; creating a $1 billion New York green bank to leverage public dollars with private sector match to spur the clean economy. He proposes to create the Charge New York Program to invest in an electric car network to reduce reliance on fossil fuels by installing a statewide network of charging stations and providing charging infrastructure tax credits (this is one of those “about time” initiatives)
But Cuomo seems to be a bit schizophrenic regarding his vision for energy and economic development. He has proposed an enlightened energy policy but still holds out the possibility on allowing hydrofracking in New York State – a process which, when all the elements are costed out and counted up, do not reduce carbon emissions (that’s the whole climate change/Superstorm Sandy thing) and affect public health and environmental deprivation. Cuomo is expected to render his decision before the end of the month.
“Gov. Cuomo talked about making our state a national progressive leader,” said Roger Downs, Atlantic Chapter conservation representative for the Sierra Club. “His commitment to invest over $1 billion over 10 years in the NY SUN solar energy program is a great start. Clean energy like solar and wind power will help create jobs, boost our economy and avert future climate disasters like Superstorm Sandy.
“This could be the beginning of Gov. Cuomo’s climate legacy, if he follows through on the commitments he made today to reduce dangerous carbon pollution, move away from large, dirty power plants and transition to local, clean energy sources like wind and solar. We can’t frack and burn our way to the safer, more prosperous future the governor outlined today. But we can reduce the threat of future climate emergencies and develop another great economic resource in Upstate New York with expanded investments in wind and solar energy to power our state’s growing economy.”
And Cuomo’s insistence on privatizing LIPA seems like throwing out the baby with the bathwater.
The better solution would be to install visionary management who appreciates the concept of “public utility,” and who identifies most strongly with the people who depend upon the utility.
Someone like Town of North Hempstead Supervisor Jon Kaiman.
