Governor Andrew Cuomo wants to privatize Long Island Power Authority, LIPA, in an effort to lower electric bills for families, reported WNYC.org.
"The time has come to abolish LIPA period," Cuomo said during his State of the State address last month. "We want to privatize the Long Island service."
Nearly 25 years ago, Andrew's father Mario, had the same intention.
One thing that remains consistent however is the global investment bank, Lazard Freres and Co., that was hired to oversee the rate analysis in the 1980s is still working behind the scenes to privatize LIPA.
During his tenure, Governor Mario Cuomo gave the LIPA the authority to own investor utility structures as a measure to stop the opening of the Shoreham nuclear plant, which many feared following a history of unfortunate nuclear failures like Three Mile and Chernobyl.
As a result Long Islanders are paying a higher rate than many across the country because they're still paying for the unopened nuclear plant that cost $6 billion to build.
The firm is under contract through March for $950,000 to provide financial advice to LIPA on privatization. Over the years, while government has confided in the company, they've only seen failed attempts to lower electric bills, reported WNYC.
"Wall Street makes money from investments and deals," said Matthew Cordaro, who was recently appointed to LIPA's board and opposes privatization. "They're interested in seeing something happen. The fact of whether it's economic or not or the best thing for the ratepayer is sort of secondary. I mean, they are a profit making entity."
In the 1980s, reported WNYC, Lazard advised that running LIPA public would save homeowners money. In addition, Bear Stearns was LIPA's underwriter for their projects and decided to sell bonds to buy the public transmission and distribution system. Bear Stearns pocketed consulting fees.
The current Cuomo proposed to sell LIPA for $4 billion (its current worth) and reduce their $7 billion debt. The remaining $3.5 billion could be refinanced from the current low interest rates.
One downside to this is that customers will have to pay off that debt in their electric bills.
