Supreme Court Suit Is Filed

Karl Grossman | January 1, 1998

Suffolk County has filed suit in State Supreme Court challenging Gov. George E. Pataki's plan to have the Long Island Power Authority partially take over the Long Island Lighting Company.

Legislator George O. Guldi, whose district includes East Hampton and Southampton Towns, described the lawsuit as a "beginning foray" by the county "in our opposition to the Pataki deal."

Mr. Guldi, a Westhampton Beach Democrat and a staunch opponent of the Pataki plan, said the lawsuit was part of "the many levels of opposition" that the Suffolk Legislature will mount.

Law Pre-Empts Utilities

Meanwhile, LIPA, in a letter sent to local officials throughout Long Island, has warned that establishment of municipal utility entities is no longer possible because of the state law that created the power authority in 1986.

This law "pre-empts any Long Island municipality from condemning any portion of the electric system in its town," said Richard Kessel, the the LIPA chairman. There are currently three municipal utilities on Long Island: in Freeport, Rockville Centre, and Greenport.

Mr. Kessel noted in his letter that some villages in Nassau and Suffolk have been considering municipal utilities, too, believing that electric rates could be significantly lowered through them.

"Preposterous" Promises

"Promises of 40 to 50 percent rate reductions are preposterous," said Mr. Kessel. "The only viable, workable plan that will significantly lower electric rates on Long Island is Governor Pataki's plan, which will reduce electric rates an average of 17 percent Islandwide."

The Suffolk lawsuit, filed in State Supreme Court in Mineola on Dec. 18, asks that the LIPA vote of Aug. 21 ratifying the $7.3 billion Pataki deal be invalidated because, it charges, LIPA at the same time shifted some of its power to set rates to the State Public Authorities Control Board.

That board is composed of the Governor, the Assembly Speaker, and Senate majority leader. The Suffolk lawsuit claims the board has no legal powers to set rates.

Earlier Lawsuit

"In simple terms," said Mr. Guldi, "what we are charging is that instead of being faithful to the reason that LIPA was created in the first place - to set energy policy on Long Island - it has become an instrument to implement a political agenda of selected state officials. It has become a political arm of the Governor, and that is unlawful."

However, Mr. Kessel maintained that the shift in rate powers was legal and all that Suffolk County was doing was "wasting taxpayer money. . . . There is no merit to this lawsuit, and I am very confident it will be thrown out of court once it's argued."

The filing of the Suffolk lawsuit followed the filing of a lawsuit also challenging the LIPA-LILCO plan by the Brigehampton-based Citizens Advisory Panel, a Federal court-appointed LILCO watchdog group, and the New York Public Interest Research Group.

Seek To Block Plan

In November, these groups brought litigation in State Supreme Court in Albany to block the plan, charging its approval by the Public Authorities Control Board was "improper, arbitrary, and capricious" because the board signed off on it without complying with the State Environmental Quality Review Act. The board approved the LILCO-LIPA plan in July.

The Citizens Advisory Panel, established in 1989 as part of a settlement of a lawsuit against LILCO brought under the Federal Racketeer Influenced Corrupt Organizations law and the New York Public Interest Research Group, created by consumer activist Ralph Nader, filed for an Article 78 injunction.

Suffolk County's lawsuit came as the Suffolk Legislature allocated $800,000 for a wide-ranging challenge to the LILCO-LIPA deal including litigation by the county and intervention before state and Federal agencies still required to consider the pact.

Opponents Claim "Bailout"

Mr. Pataki, in announcing the plan last March, said it would reduce electric rates on Long Island by 17 percent primarily because LIPA need not pay taxes and the bonds it floats are tax-exempt.

LIPA would acquire the transmission and distribution system of LILCO and assume its $4 billion debt on its now defunct Shoreham nuclear plant project.

Opponents, including most members of the Suffolk Legislature, hold the deal is a "bailout" for LILCO and, among other things, question the claimed rate-savings, criticize the public absorption of the LILCO Shoreham debt, and the plan's arrangement for LILCO to continue to own its generating facilities and be the near-exclusive provider of electricity for Long Island.

Hydro Unavailable

Mr. Kessel, a Nassau Democrat, also said in his Dec. 15 letter that those who claim that the municipal utilities in Freeport, Rockville Centre, and Greenport are good models are not in tune with the times.

"All three Long Island municipal electric utilities trace their origins to the turn of the century," said Mr. Kessel, and they use "very inexpensive . . . hydro power from the New York Power Authority to meet nearly all of their power needs."

"Any new municipal electric utility would be unable to purchase such inexpensive NYPA hydro power until after at least the year 2013, since such hydro power is fully committed under contracts until then . . . due to the dependence of current municipal systems on the existing supply."