Many Risks, No Public Hearings for Government-Utility Takeover Commission on Long Island

Last session, the New York State legislature created a commission to study a government takeover of the Long Island Power Authority (LIPA). This would municipalize the local grid, currently run by PSEG which provides power to more than 1 million Long Island residents.

That commission was supposed to be holding hearings to get input from the community about the idea before the end of September. Despite the commission being given $2 million in taxpayer dollars to do its job, these hearings did not happen on time. This is a slap in the face to everyone on Long Island who would have to suffer if the government runs their electric utility, and yet, the commission’s report is expected to be completed ahead of next year without the public’s feedback.

Since they are missing out on needed criticism of a government takeover, here are some of the many reasons this plan would be a terrible mistake.

For one, proponents of this government energy takeover will say rates will be lower for consumers. That is only because government rigs the playing field in their favor with exemptions from federal taxes, and tax-exempt bonding.

Empire Center highlights how the pro-takeover claim that no longer paying fees to PSEG will save money is wrong, as LIPA overspends: “In addition to growing debt, its payroll has reportedly grown by 21 percent even as its staff shrank by 37 percent.”

One of the reasons utility costs are high for Long Islanders is because LIPA has been paying off a lot of debt. Something a government takeover cannot fix, but could obscure.

Another fable told to push government-run energy is that it is more “accountable.” The idea government is more accountable to taxpayers or consumers is laughable.

In reality, private utilities have to answer to customers and to the government. They are overseen by a state utility commission. When government runs the utility and regulates it, that is a classic conflict of interest – they’re going to be less strict and more subject to politics.

A fully private model would be the most efficient and affordable utility model. That would enable the costs of utilities to be more broadly and evenly distributed, making them as low and transparent as possible. On the other hand, the more government is involved, the more costs are hidden, passed on, and/or subsidized by taxpayers.

Studies have found government-owned utilities cost more overall. For example, the Los Angeles Department of Water and Power’s “electric costs exceed the average costs of each of three comparison panels – California Utilities, urban investor-owned utilities (IOUs), and publicly-owned utilities.”

With all these downsides there has been understandable concern from many on Long Island that this plan could be a disaster, and a group of business organizations have urged the commission studying the government takeover to also consider a private sale. “The coalition of nine business groups, including the Association for a Better Long Island, the Long Island Association and the Long Island Builders Institute, said the commission must study all three options for LIPA.”

This modest proposal was pilloried by Assemblyman Fred Thiele, who proposed the commission.

With no consideration of a private sale, the commission’s report will just be cover for the legislature to have the government take over the utility.

Taxpayers will ultimately be responsible for this government takeover scheme. Government-controlled utilities create debt to finance the operation, paying down the debt over time. Any difficulty in repaying the debt could result in taxes being increased to cover the gap – and government does not have the strongest record when it comes to managing an enterprise.

Additionally, the change would leave a gap in property tax revenues, as the private utility which is one of the biggest local property taxpayers turns into a government entity. Any artificial savings on energy bills could be offset by higher property tax bills.

A government takeover of PSEG is only a dream for politicians who want more government control, it is a total nightmare for Long Island taxpayers and consumers.