Is bankruptcy LIPA's saving grace?
Not long after the Long Island Power Authority (LIPA) came under fire for its handling of Superstorm Sandy, many major energy users in the area are calling for LIPA to file bankruptcy.
"Preventing LIPA from creating a system that can respond to severe weather is the combined $17 billion burden of Shoreham (atomic energy plant closed in 1989 that never generated any energy) debt and debt service created from shutting down that nuclear power plant a generation ago," said Association for a Better Long Island (ABLI) Executive Director Desmond Ryan. "It doesn't matter if you privatize LIPA or dismiss all its current executives. That financial obligation will continue to distort the region's economy for generations to come unless we address it now and bankruptcy is a viable path."
ABLI executive board member and former LIPA Board member Vincent Polimeni called for the utility authority to declare bankrupt years ago. The Chapter 11 declaration by LIPA would not be unprecedented.
"Look to other utilities to create a LIPA bankruptcy roadmap. In 2001, Pacific Gas and Electric Company filed for bankruptcy protection after the energy crisis left it with a $9 billion debt and no viable solution to protect the ratepayer," Ryan said. "Back in 1992, the El Paso utility in Texas filed for protection because of the debt created by the construction of a nuclear power plant."
The process is not pleasant, obviously, but proponents of the bankruptcy option say it is the right thing to do to get past a debt that can be devastating to ratepayers.
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