Bill S6136-2011

Relates to the public service department undertaking a comprehensive and regular management and operations audit of the Long Island power authority; repealer

Relates to the public service department undertaking a comprehensive and regular management and operations audit of the Long Island power authority.

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  • Jan 30, 2012: SUBSTITUTED BY A8957
  • Jan 9, 2012: ORDERED TO THIRD READING CAL.20
  • Jan 9, 2012: REPORTED AND COMMITTED TO RULES
  • Jan 4, 2012: REFERRED TO ENERGY AND TELECOMMUNICATIONS

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BILL NUMBER:S6136

TITLE OF BILL:

An act to amend the public service law, in relation to the department of public service; to amend the public authorities law, in relation to the Long Island power authority; to amend the executive law, in relation to the department of state; and to repeal a chapter of the laws of 2011 amending the public service law relating to the Long Island power authority, as proposed in legislative bill numbers S.2581 and A.3614

PURPOSE OF BILL:

The bill would (i) require the Long Island power authority ("LIPA" or "the Authority") to undergo a comprehensive and regular management and operations audit to maximize the Authority's operational efficiencies through review of internal procedures and policies, (ii) provide the Department of State with specific authority to investigate and mediate complaints made by LIPA's customers, and (iii) repeal a chapter of the laws of 2011 amending the public service law ("PSL") relating to LIPA, as proposed in legislative bill numbers S.2581 and A.3614.

SUMMARY OF PROVISIONS:

Section 1 of the bill names the bill the Long Island power authority oversight and accountability act.

Section 2 would amend § 3 of the PSL to require the Department of Public Service ("DPS") to undertake a comprehensive and regular management and operations audit of LIPA. DPS would have discretion to have such audit conducted by an independent consultant chosen by and under such terms negotiated by the Department, but through a contract entered into between the independent auditor, LIPA and DPS. The process used by DPS to choose the independent auditor would be similar to the process it currently uses under PSL § 66(19), as applied to audits of investor-owned utilities ("IOUs").

Section 3 would add a new subdivision (bb) to § 1020-f of the public authorities law ("PAL") - divided into four separate paragraphs - to establish the substantive requirements and procedures to be followed with respect to the comprehensive and regular management and operations audits of LIPA.

Paragraph 1 would require LIPA to cooperate with DPS and/or the independent auditor and would provide the auditing standards that must be followed in undertaking such audit. In particular, the auditor would be required to review and evaluate LIPA's overall operations and management, including the Authority's operations and management in the context of its duty to set rates at the lowest level consistent with the standards and procedures provided in PAL §1020-f(u). The auditor would also be required to examine a non-exclusive list of six audit topics related to LIPA's operations and management.

Paragraph 2 would establish the frequency of the audits, with the first audit being initiated immediately and in a manner and to an extent that is practicable in the context or LIPA's transition to a new management service structure. The second audit would be initiated no later than December 15, 2015 and all additional audits would be initiated at least once every five years thereafter. Paragraph 2 would also require public statement hearings to be held in both Nassau and Suffolk Counties at the beginning of each audit process.

Paragraph 3 would require each audit to be completed within eighteen months of initiation, with a standard for an extension of time, and for the audit report to be provided to the LIPA Board, DPS and certain public officials, and be posted on LIPA's website. Paragraph 3 would also provide the LIPA Board with authority to make a preliminary determination with respect to whether any finding or recommendation contained in such audit report is inconsistent with the Authority's sound fiscal operating practices, any existing contractual or operating obligation, or the provision for safe and adequate service ("determination of inconsistency").

Paragraph 4 would establish the process that the LIPA Board must follow in providing for public review of such a preliminary determination of inconsistency, if and when one is made, and the time period associated with such review. The LIPA Board would be required to hold a public hearing with respect to any preliminary determination of inconsistency, at which DPS or the independent auditor would be required to present the basis for its determinations. The LIPA Board would be required to hold a public hearing with respect to any preliminary determination of inconsistency, at which DPS or the independent auditor would be required to present the basis for its findings and recommendations and the Board to present the basis for its determination of inconsistency. Paragraph 4 would also provide the LIPA Board with authority to make a final determination of inconsistency, which would be subject to any applicable judicial review proceeding, including review under article 78 of the civil practice law and rules.

Section 4 would amend Executive Law § 94-a(4)(b) to provide the Utility Intervention Unit within the Department of State's Division of Consumer Protection, with authority to accept and investigate

complaints made by LIPA customers, attempt to mediate such complaints where appropriate, and to refer such complaints to the appropriate state or local agencies.

Section 5 would repeal a chapter of the laws of 2011 amending the public service law ("PSL"), as proposed in legislative bill numbers S.2581 and A.3614, related to subjecting to review and approval by the Public Service Commission ("PSC") any proposal by LIPA to increase customer rates exceeding two and half over a twelve month period.

Section 6 would make the bill effective immediately upon enactment into law.

EXISTING LAW:

This is a new bill; LIPA is currently not required under its enabling statute to undergo a management and operations audit.

STATEMENT IN SUPPORT:

There is a present and continuing need for LIPA's internal standards and procedures to become more transparent and to ensure adherence with best-industry practices. There is also a need for LIPA to maximize the efficiencies of its management and operations, with the recognition that implementation of such efficiencies provides for the most economical electricity rates consistent with LIPA's obligations under its enabling statute. The purpose of this bill is to meet these dual needs by requiring LIPA to undergo a comprehensive and regular management and operations audit that is open to public review and comment. This would subject LIPA's internal standards and procedures to more public scrutiny in a manner that promotes improvement of LIPA's management and operations to the benefit of its customers.

The comprehensive audit would be similar to the audits currently undertaken by the Public Service Commission under PSL § 66(19), but would be subject to a more inclusive public comment and review process. The public nature of the process (in the new §1020-f(bb)(2), (4)), and in particular the requirement that the LIPA Board make a public presentation of any determination of inconsistency, would ensure that the Board's final decision with respect to adopting the audit's findings and recommendations is held to a more rigorous standard than currently exists for any other utility in the state. The bill clarifies, moreover, that any final determination of inconsistency would be subject to court review by any effected party. This transparency is balanced with ensuring that the LIPA Board retains the authority to implement the audit recommendations, therefore preserving the Board's independent ratemaking authority, consistent with LIPA's enabling statute. The entire process that would be imposed under the bill balances the need to find efficiencies for the benefit of ratepayers against LIPA's continuing statutory and contractual obligations.

The first audit of LIPA, to be initiated immediately upon enactment of the bill into law, would be undertaken in a manner that acknowledges that the Authority is currently transitioning to a new management service structure and entering into a new management service agreement projected to be completed by January 1, 2014. Among other things, the bill is intended to ensure that the new structure is operated in an efficient and cost-effective manner.

In response to the concerns that have been raised by LIPA's customers regarding the lack of a sufficient consumer advocate, the bill would also give the Utility Intervention Unit ("UIU"), within the Department of State's Division of Consumer Protection, with specific authority to investigate any complaints made by such customers and mediate such complaints consistent with LIPA's tariff, and to refer such complaints to appropriate state and local agencies for further review. The new authority granted the Department of State would augment LIPA's existing program.

PRIOR LEGISLATIVE HISTORY:

This is a new proposal.

BUDGET IMPLICATIONS:

None.

EFFECTIVE DATE:

The bill would become effective immediately.


Text

STATE OF NEW YORK ________________________________________________________________________ S. 6136 A. 8957 S E N A T E - A S S E M B L Y (PREFILED) January 4, 2012 ___________
IN SENATE -- Introduced by Sens. LAVALLE, FLANAGAN, FUSCHILLO, HANNON, JOHNSON, MARCELLINO, MARTINS, SKELOS, ZELDIN -- read twice and ordered printed, and when printed to be committed to the Committee on Energy and Telecommunications IN ASSEMBLY -- Introduced by M. of A. SWEENEY, WEISENBERG, LAVINE, SCHI- MEL, ENGLEBRIGHT, THIELE, MURRAY, RAIA, CONTE, SALADINO, McKEVITT, McDONOUGH, MONTESANO -- read once and referred to the Committee on Corporations, Authorities and Commissions AN ACT to amend the public service law, in relation to the department of public service; to amend the public authorities law, in relation to the Long Island power authority; to amend the executive law, in relation to the department of state; and to repeal a chapter of the laws of 2011 amending the public service law relating to the Long Island power authority, as proposed in legislative bill numbers S. 2581 and A. 3614 THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. This act shall be known and may be cited as the "Long Island power authority oversight and accountability act". S 2. Section 3 of the public service law, as amended by chapter 155 of the laws of 1970, is amended to read as follows: S 3. Department of public service. 1. There shall be in the state government a department of public service. The chairman of the public service commission shall be the chief executive officer of the depart- ment. He OR SHE shall appoint and shall have the power to remove, subject to the provisions of the civil service law, all officers, clerks, inspectors, experts and employees of the department, and to approve all contracts for special service. The chairman shall designate one of the commissioners in the department or an officer of the depart- ment to act as deputy chairman during the absence or disability of the chairman and during such times such deputy chairman shall possess all the powers of the chairman as chief executive officer of the department.
2. THE DEPARTMENT SHALL, UPON NOTIFICATION TO THE LONG ISLAND POWER AUTHORITY, UNDERTAKE A COMPREHENSIVE AND REGULAR MANAGEMENT AND OPER- ATIONS AUDIT OF SAID AUTHORITY PURSUANT TO SUBDIVISION (BB) OF SECTION ONE THOUSAND TWENTY-F OF THE PUBLIC AUTHORITIES LAW. THE DEPARTMENT SHALL HAVE DISCRETION TO HAVE SUCH AN AUDIT PERFORMED BY ITS STAFF, OR BY AN INDEPENDENT CONTRACTOR. IN EVERY CASE IN WHICH AN AUDIT IS REQUIRED PURSUANT TO SUBDIVISION (BB) OF SECTION ONE THOUSAND TWENTY-F OF THE PUBLIC AUTHORITIES LAW PERFORMED BY AN INDEPENDENT AUDITOR, THE DEPARTMENT SHALL HAVE THE AUTHORITY TO SELECT THE AUDITOR, AND TO REQUIRE THE LONG ISLAND POWER AUTHORITY TO ENTER INTO A CONTRACT WITH THE AUDITOR THAT IS CONSISTENT WITH THE CONTRACTING-RELATED REQUIREMENTS SPECIFIED IN SUBDIVISION NINETEEN OF SECTION SIXTY-SIX OF THIS CHAPTER AND THE REQUIREMENTS OF SUBDIVISION (BB) OF SECTION ONE THOUSAND TWEN- TY-F OF THE PUBLIC AUTHORITIES LAW. SUCH CONTRACT SHALL PROVIDE FURTHER THAT THE AUDITOR SHALL WORK FOR AND UNDER THE DIRECTION OF THE DEPART- MENT ACCORDING TO SUCH TERMS AS THE DEPARTMENT MAY DETERMINE ARE NECES- SARY AND REASONABLE. S 3. Section 1020-f of the public authorities law, as added by chapter 517 of the laws of 1986, is amended by adding a new subdivision (bb) to read as follows: (BB) COMPREHENSIVE AND REGULAR MANAGEMENT AND OPERATIONS AUDITS. 1. THE AUTHORITY SHALL COOPERATE IN THE UNDERTAKING AND COMPLETION OF A REGULAR AND COMPREHENSIVE MANAGEMENT AND OPERATIONS AUDIT CONDUCTED PURSUANT TO THE REQUIREMENTS OF THIS SUBDIVISION AND SUBDIVISION TWO OF SECTION THREE OF THE PUBLIC SERVICE LAW. SUCH AUDIT SHALL REVIEW AND EVALUATE THE AUTHORITY'S OVERALL OPERATIONS AND MANAGEMENT, INCLUDING THE AUTHORITY'S OPERATIONS AND MANAGEMENT IN THE CONTEXT OF ITS DUTY TO SET RATES AT THE LOWEST LEVEL CONSISTENT WITH STANDARDS AND PROCEDURES PROVIDED IN SUBDIVISION (U) OF THIS SECTION, AND INCLUDE, BUT NOT BE LIMITED TO: (I) THE AUTHORITY'S CONSTRUCTION AND CAPITAL PROGRAM PLAN- NING IN RELATION TO THE NEEDS OF ITS CUSTOMERS FOR RELIABLE SERVICE; (II) THE OVERALL EFFICIENCY OF THE AUTHORITY'S OPERATIONS; (III) THE MANNER IN WHICH THE AUTHORITY IS MEETING ITS DEBT SERVICE OBLIGATIONS; (IV) THE AUTHORITY'S FUEL AND PURCHASED POWER COST ADJUSTMENT CLAUSE AND RECOVERY OF COSTS ASSOCIATED WITH SUCH CLAUSE; (V) THE AUTHORITY'S ANNU- AL BUDGETING PROCEDURES AND PROCESS; AND (VI) THE AUTHORITY'S COMPLIANCE WITH DEBT COVENANTS. 2. THE DEPARTMENT OF PUBLIC SERVICE SHALL NOTIFY THE AUTHORITY THAT SAID DEPARTMENT IS IN THE PROCESS OF INITIATING A COMPREHENSIVE MANAGE- MENT AND OPERATIONS AUDIT AS DESCRIBED IN PARAGRAPH ONE OF THIS SUBDIVI- SION IN A MANNER THAT ENSURES THE TIMELINESS OF SUCH AUDIT, AND IN ACCORDANCE WITH THE FOLLOWING TIMEFRAME: THE FIRST COMPREHENSIVE MANAGE- MENT AND OPERATIONS AUDIT SHALL BE INITIATED AS OF THE EFFECTIVE DATE OF THIS SUBDIVISION AND UNDERTAKEN IN A MANNER AND TO AN EXTENT THAT IS PRACTICABLE IN THE CONTEXT OF THE AUTHORITY'S TRANSITION TO A NEW MANAGEMENT SERVICE STRUCTURE; THE SECOND COMPREHENSIVE MANAGEMENT AND OPERATIONS AUDIT SHALL BE INITIATED NO LATER THAN DECEMBER FIFTEENTH, TWO THOUSAND FIFTEEN; AND ALL ADDITIONAL COMPREHENSIVE MANAGEMENT AND OPERATIONS AUDITS SHALL BE INITIATED AT LEAST ONCE EVERY FIVE YEARS THEREAFTER. WITHIN A REASONABLE TIME AFTER SUCH NOTIFICATION TO THE AUTHORITY, SAID DEPARTMENT OR THE INDEPENDENT AUDITOR RETAINED BY THE AUTHORITY TO UNDERTAKE SUCH AUDIT SHALL HOLD PUBLIC STATEMENT HEARINGS, WITH PROPER NOTICE, IN BOTH NASSAU AND SUFFOLK COUNTIES FOR THE PURPOSE OF RECEIVING BOTH ORAL AND WRITTEN COMMENTS FROM THE PUBLIC ON MATTERS RELATED TO SUCH AUDIT AS DESCRIBED IN PARAGRAPH ONE OF THIS SUBDIVISION.
3. EACH SUCH AUDIT SHALL BE COMPLETED WITHIN EIGHTEEN MONTHS OF INITI- ATION ABSENT AN EXTENSION FOR GOOD CAUSE SHOWN BY THE DEPARTMENT OF PUBLIC SERVICE OR THE INDEPENDENT AUDITOR UNDER CONTRACT WITH THE AUTHORITY WITH NOTICE OF SUCH EXTENSION TO THE GOVERNOR, THE TEMPORARY PRESIDENT OF THE SENATE, THE SPEAKER OF THE ASSEMBLY, AND THE CHAIRS OF THE AUTHORITY AND THE DEPARTMENT OF PUBLIC SERVICE. SUCH AUDIT SHALL BE PROVIDED TO THE BOARD OF THE AUTHORITY IMMEDIATELY UPON ITS COMPLETION. THE DEPARTMENT OF PUBLIC SERVICE SHALL PROVIDE NOTICE OF COMPLETION OF SUCH AUDIT TO THE GOVERNOR, THE TEMPORARY PRESIDENT OF THE SENATE, THE SPEAKER OF THE ASSEMBLY, AND THE MINORITY LEADERS OF THE SENATE AND ASSEMBLY, AND THE AUTHORITY, UPON RECEIPT OF SUCH AUDIT, SHALL POST A COPY OF SUCH AUDIT, INCLUDING FINDINGS AND RECOMMENDATIONS, ON ITS WEBSITE. UNLESS THE BOARD OF THE AUTHORITY MAKES A PRELIMINARY DETERMI- NATION THAT ANY PARTICULAR FINDING OR RECOMMENDATION CONTAINED IN SUCH AUDIT IS INCONSISTENT WITH THE AUTHORITY'S SOUND FISCAL OPERATING PRAC- TICES, ANY EXISTING CONTRACTUAL OR OPERATING OBLIGATION, OR THE PROVISION FOR SAFE AND ADEQUATE SERVICE, THE BOARD SHALL IMPLEMENT SUCH FINDINGS AND RECOMMENDATIONS IN ACCORDANCE WITH THE TIMEFRAME SPECIFIED UNDER SUCH AUDIT. 4. THE BOARD OF THE AUTHORITY SHALL MAKE ANY PRELIMINARY DETERMINATION OF INCONSISTENCY WITH RESPECT TO ANY SUCH FINDING OR RECOMMENDATION WITHIN THIRTY DAYS OF RECEIPT OF THE AUDIT, WITH NOTICE AND THE BASIS OF SUCH DETERMINATION BEING PROVIDED TO THE DEPARTMENT OF PUBLIC SERVICE. SUCH NOTICE AND BASIS SHALL BE POSTED CONTEMPORANEOUSLY ON THE AUTHORI- TY'S WEBSITE AND THE BOARD SHALL, WITHIN THIRTY DAYS OF SUCH POSTING AND WITH DUE ADVANCE NOTICE TO THE PUBLIC, HOLD A PUBLIC HEARING WITH RESPECT TO ITS PRELIMINARY DETERMINATION OF INCONSISTENCY. AT SUCH HEAR- ING THE DEPARTMENT OF PUBLIC SERVICE OR THE INDEPENDENT AUDITOR RESPON- SIBLE FOR UNDERTAKING SUCH AUDIT SHALL PRESENT THE BASIS FOR ITS FIND- INGS AND RECOMMENDATIONS AND THE BOARD SHALL PRESENT THE BASIS FOR ITS DETERMINATION OF INCONSISTENCY. THE AUTHORITY AND AUDITOR MAY DURING THE TIME PERIOD PRIOR TO SUCH PUBLIC HEARING REACH AGREEMENT ON DISPUTED ISSUES. WITHIN THIRTY DAYS AFTER SUCH PUBLIC HEARING, THE BOARD OF THE AUTHORITY SHALL ANNOUNCE ITS FINAL DETERMINATION AND PLANNED IMPLEMENTA- TIONS WITH RESPECT TO ANY SUCH FINDINGS AND/OR RECOMMENDATIONS. THE BOARD'S FINAL DETERMINATION OF INCONSISTENCY SHALL BE SUBJECT TO ANY APPLICABLE JUDICIAL REVIEW PROCEEDING, INCLUDING REVIEW AVAILABLE UNDER ARTICLE SEVENTY-EIGHT OF THE CIVIL PRACTICE LAW AND RULES. S 4. Paragraph (b) of subdivision 4 of section 94-a of the executive law, as added by section 21 of part A of chapter 62 of the laws of 2011, is amended to read as follows: (b) The utility intervention unit shall have the power and duty to: (i) on behalf of the secretary, initiate, intervene in, or participate in any proceedings before the public service commission, to the extent authorized by sections twenty-four-a, seventy-one, eighty-four or nine- ty-six of the public service law or any other applicable provision of law, where he or she deems such initiation, intervention or partic- ipation to be necessary or appropriate; [and] (ii) represent the interests of consumers of the state before federal, state and local administrative and regulatory agencies engaged in the regulation of energy services[.]; AND (III) ACCEPT AND INVESTIGATE COMPLAINTS OF ANY KIND FROM LONG ISLAND POWER AUTHORITY CONSUMERS, ATTEMPT TO MEDIATE SUCH COMPLAINTS WHERE APPROPRIATE DIRECTLY WITH SUCH AUTHORITY AND REFER COMPLAINTS TO THE APPROPRIATE STATE OR LOCAL AGENCY AUTHORIZED BY LAW TO TAKE ACTION WITH RESPECT TO SUCH COMPLAINTS.
S 5. A chapter of the laws of 2011 amending the public service law relating to the Long Island power authority, as proposed in legislative bill numbers S. 2581 and A. 3614, is REPEALED. S 6. This act shall take effect immediately; provided that section five of this act shall take effect on the same date as a chapter of the laws of 2011 amending the public service law relating to the Long Island power authority, as proposed in legislative bill numbers S. 2581 and A. 3614, takes effect.

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