PSEG Subsidiary Inks $400 Million Deal to Manage Long Island Power Authority Network

PSEG Long Island to take over LIPA transmission and distribution system, improve customer service

A piece of Public Service Enterprise Group is moving to Long Island.

PSEG Long Island LLC, a subsidiary of the Newark energy company, yesterday was selected by the Long Island Power Authority (LIPA) to manage its electric and transmission system under a $40 million a year contract over a decade.

The awarding of the contract marks a new venture for PSEG, which owns Public Service Electric & Gas, New Jersey’s largest gas and electric utility. PSEG Long Island was one of three finalists considered for LIPA management services contract, which will begin January 1, 2014 after a two-year transition period and run for 10 years.

In taking over LIPA’s distribution and transmission system, PSEG Long Island will oversee a system about half as big as the one PSE&G manages in New Jersey. LIPA’s system is currently run by National Grid. The contract includes incentive targets of up to $5 million to improve customer satisfaction and provide safe and reliable service for 1.1 million LIPA customers.

“In accepting our proposal, LIPA recognized the depth of PSEG’s experience and its ability to assist LIPA in managing, a safe, highly reliable electric system on behalf of its customers and in improving customer service,” said Scott Jennings, PSEG vice president of development.

Besides owning PSE&G, Jennings noted PSEG once owned a number of utilities in Latin America and has vast experience in managing transmission systems. Jennings said the LIPA contract represented a unique opportunity, and doubts the company will seek to do similar ventures elsewhere in the U.S.

Under the agreement, PSEG Long Island will be responsible for managing electric transmission and distribution operations, customer services, LIPA’s 18 percent ownership of Nine Mile Point 2 Nuclear station in upstate New York, and related functions. Lockheed Martin, a subcontractor to PSEG Long Island, will provide transition management, information technology, energy efficiency services and, other services.

Jennings said the contract will result in additional hiring, although the company also planned to select a senior management team from within that would move to Long Island and work with LIPA.

“Operating a utility safely and reliably is our core strength and one in which we take great pride,” said Ralph LaRossa, president and chief operating officer of PSE&G, New Jersey’s oldest electric and gas utility. “The LIPA services agreement recognizes that commitment to excellence, and will enable us to share best management and operational practices with LIPA and their customers.”

PSE&G has been recognized as the most reliable utility in the nation and in the Mid-Atlantic states. Ironically, the contract award came out a day after the New Jersey Board of Public Utilities issued with a preliminary report criticizing the response and performance of the four electric utilities following Hurricane Irene and a rare late October snowstorm, which left hundreds of thousands of customers without power, some for as long as eight days.