- The Board of Trustees has approved the selection of Public Service Enterprise Group, Inc. (PSEG) to be LIPA’s Utility Services Management partner targeted to commence on January 1, 2014.
- LIPA is confident that this decision, coupled with the adoption of an improved business model (October 2011), will provide LIPA customers with the best possible value, which is our primary objective. PSEG will be a new partner operating the transmission and distribution system with LIPA under a new, improved business model. The creation of a joint operating committee will allow for a more collaborative process, which will enhance the level of accountability, transparency and control between LIPA and PSEG.
- PSEG is one of the most highly regarded utility companies according to J.D. Power & Associates – with high rankings for reliability and customer service
- PSEG will have a wholly-owned business unit dedicated solely to LIPA and its customers and it will be a consistent presence in our community, as all of this unit’s employees will work here on Long Island.
Improved Business Model Overview:
- Under the new way of doing business, PSEG will be LIPA’s partner operating under a new, improved business model.
- Creating a joint operating committee will ensure a collaborative process, which will improve the level of transparency, accountability and control between LIPA and PSEG. This model is expected to allow LIPA and PSEG to operate at the highest levels of efficiency, resulting in improved services to customers.
- Under this contract, LIPA will have approval rights over the annual budget and capital expenditures, which will provide LIPA with control over spending and the ability to decide how best to allocate resources.
- These capabilities will facilitate better management of customer rates going forward, which will continue to allow for rate stability for customers.
About these Frequently Asked Questions (FAQs):
Have a question about the transition? Anyone can submit questions anonymously to this FAQ section of this website. From the home page, click on the Submit a Question tab. When submitting a question, email addresses are not required or tracked so that confidentiality is maintained, and every question submitted is read. We regret that we cannot send individual responses or answer questions related to individual situations; however, where possible, we will answer questions and post them to this website. There are many questions that cannot be answered at this point, and we ask for your patience and understanding. We are committed to informing you of major decisions, as soon as feasible, during the transition. We appreciate you taking the time to bring your questions to our attention.
Contract:
A1. Why is LIPA contracting for Management Services at this time?A2. What services will be included in the new contract?
A3. What kind of benefits will the newly adopted improved business model provide and how does it enable improved management by LIPA?
A4. When will this new contract start?
A5. What is the cost proposed by PSEG?A6. How do the costs of this contract compare to those under the existing contract, and how will these costs affect my rates?
A7. Will LIPA have details about this contract available to the public?
A8. What is the status of the approvals by regulators?
A9. Why has LIPA decided to once again bid out the management of its electric system, rather than form a municipal electric system? Wouldn't that be less distracting to employees?
Selection Process:
B1. Why was PSEG chosen?
B2. What external approvals are required for this contract?
Service Provider:
C1. What is Lockheed Martin’s role under the new contract with PSEG?
C2. What is the name of the new organization that will run the LIPA system after the transition period?
C3. How do LIPA, PSEG, PSEG Long Island LLC, Lockheed Martin and “ServCo” interrelate?
C4. What expertise do PSEG and Lockheed Martin bring to Long Island?
C5. When will the Senior Management team for PSEG Long Island be named?
C6. What is the process for designing the new organization?
C7. Will the new organizational design mirror what is currently in place?
C8. How can anyone expect all of T&D to be physically and logically separated from National Grid within in two years? It would involve security, HVAC, networks, offices, building leases, applications, etc.
Service:
D2. Is PSEG committed to energy efficiency and renewable initiatives?
D3. Will there be any change in my service now?
D4. Will I receive my electric bill from LIPA and my gas bill from National Grid?
D5. What is the difference between electric and gas management?
Employee:
E1. What is the timing for staffing the new organization?
E2. What will happen to those National Grid employees currently providing services to LIPA once the new contract is in effect?
E3. Will the new Service Provider honor the union bargaining agreements?
E4. How does the new contract affect employee pensions?
E5. How does the new contract affect employee benefits? Will ServCo establish its own employee benefit plans?
E6. After the operations period commences, how will staffing changes and compensation (including any incentive compensation) be adjusted?
E7. What is PSE&G’s benefits package like?
E8. Will the non-union ServCo employees be offered the protection of a 10-year contract?
E9. What communications should employees expect during the transition period?
E10. Will National Grid employees be given a choice of which company they will work for?
E11. Where will the ServCo employees be located?
E12. Is PSEG presently recruiting for engineering positions to staff a subsidiary on
E13. Does LIPA own any buildings or do they rent all the locations?
Contract:
A1. Why is LIPA contracting for Management Services at this time?
LIPA has a Management Service Agreement (MSA) with National Grid for operation and maintenance of LIPA’s transmission and distribution system that expires on December 31, 2013. In anticipation of that date, LIPA issued a competitive procurement seeking a vendor to provide such services under a new, long-term contract after the MSA ends.
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A2. What services will be included in the new contract?
The new contract will include all services necessary for PSEG to perform the day-to-day operations of Long Island’s utility business in a safe and reliable manner through a dedicated business unit providing services exclusively for LIPA’s customers. This business unit will exist as a stand-alone subsidiary of PSEG.
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A3. What kind of benefits will the newly adopted improved business model provide and how does it enable improved management by LIPA?
LIPA required PSEG to create a wholly-owned business unit dedicated solely to LIPA’s customers and will be a consistent presence in our community.
Through creating a joint operating committee, LIPA and PSEG will work together to ensure the highest level of efficiency – providing increased visibility, transparency, accountability and control, thereby resulting in improved customer service. Under this contract, LIPA will have approval rights over the annual budget and capital expenditures, which will provide LIPA with a clear line of sight into operating costs and the ability to decide how best to allocate LIPA resources. These capabilities will better enable LIPA to manage rates going forward.
The improved business model also provides for the flexibility to move to municipalization or privatization; should either option become desirable in the future.
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A4. When will this new contract start?
LIPA anticipates that following a transition period that began in 2012, the new contract with PSEG will commence on January 1, 2014 and remain in effect for a 10-year period.
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A5. What is the cost proposed by PSEG?
PSEG contract costs for 2014, the first year of full operations, inclusive of its management services fee and estimated costs of operating LIPA’s system are $245 million expressed in today’s dollars. PSEG’s proposed management fee was the lowest of the three finalists saving LIPA’s ratepayers on a net present value basis $110 million.
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A6. How do the costs of this contract compare to those under the existing contract, and how will these costs affect my rates?
The costs under the new contract are similar to those under the existing contract. While there are many factors that affect customer rates, the new contract is not expected to negatively affect the rates LIPA customers pay for electric services
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A7. Will LIPA have details about this contract available to the public?
After all approvals are obtained, the new contract will be available under the Freedom of Information Law.
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A8. What is the status of the approvals by regulators?
After all approvals are obtained, the new contract will be available under the Freedom of Information Law.
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A9. Why has LIPA decided to once again bid out the management of its electric system, rather than form a municipal electric system? Wouldn't that be less distracting to employees?
In October 2011, the LIPA Board of Trustees voted for the public/private partnership option based on a comprehensive strategic analysis and recommendation of the Brattle Group, which determined that the ServCo model was in the best interest of LIPA's customers. At this time, there is no plan to revisit that strategic business model decision.
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Selection Process:
PSEG was selected as the new service provider based on a joint proposal that demonstrated the following key strengths:
- Proven track record of 1st quartile customer service and reliability;
- A corporate culture that emphasizes transparency and local decision making;
- A commitment to efficiency, cost control and customer satisfaction;
- Superior IT and management system experience;
- Experience with similar complex business transitions by Lockheed Martin Services, Inc.;
- A comprehensive and detailed plan that demonstrates the ability to achieve a seamless transition of services; and
- Lowest cost and best value for LIPA customers.
PSEG, with subcontractor Lockheed Martin’s services, will create a team with complex business transition experience to ensure a seamless transition of services in 2014.
J.D. Power & Associates ranks PSEG significantly higher than the other competitive proposers for both reliability and customer service.
PSEG is partnering with LIPA under a new, improved business model. PSEG will work with LIPA under a joint operating committee, dedicated to enhancing the level of accountability, transparency and control between LIPA and PSEG.
PSEG currently provides electric and gas services to 4 million New Jersey customers and has a proven track record of superior customer service, reliability, technical expertise as well as a proven environmental track record.
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B2. What external approvals are required for this contract?
Regulatory approvals must be obtained from the Internal Revenue Service, the Attorney General and the NYS Office of the Comptroller before the new contract becomes effective. These approvals are expected to be secured over the next several months.
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Service Provider:
C1. What is Lockheed Martin’s role under the new contract with PSEG?
PSEG subcontracted with Lockheed Martin for its expertise gained from its work on complex transitions at US military bases and other types of service provider arrangements. Lockheed will take the lead in assuring a smooth transition to PSEG when the new contract begins January 1, 2014. Lockheed will have an active involvement in the IT Operations and the back-office support services performed by PSEG.
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C2. What is the name of the new organization that will run the LIPA system after the transition period?
We have not yet selected a permanent name for the new organization. The temporary name for this new organization is “ServCo.”
C3. How do LIPA, PSEG, PSEG Long Island LLC, Lockheed Martin and “ServCo” interrelate?
PSEG Long Island LLC is a wholly-owned indirect subsidiary of PSEG and is the entity that contracted with LIPA to manage its electric distribution system beginning January 1, 2014.
PSEG Long Island will have overall responsibility to manage the operations and direct the oversight of the electric distribution and customer services functions. It has contracted with Lockheed Martin to assist with the management of the transition from National Grid and to provide oversight for the on-going back-office corporate services functions.
PSEG Long Island will manage LIPA operations through an entity temporarily referred to as “ServCo,” which will conduct the day-to-day operations for LIPA’s utility business.
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C4. What expertise do PSEG and Lockheed Martin bring to Long Island?
PSEG is a recognized leader in electric system reliability and customer service. Lockheed Martin has extensive expertise in transition management and back office support management, successfully doing such work for the federal government and other entities including public utilities (especially in the area of energy efficiency). PSEG has also been recognized as a leader in the communities it serves and looks forward to becoming part of the Long Island community.
While PSEG brings many competencies to the table, it is also very excited to have this opportunity to partner with such an experienced and dedicated workforce. PSEG recognizes the many successes that the National Grid employees working on the LIPA system have achieved over the years and looks forward to learning from them about their processes, experiences and systems.
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C5. When will the Senior Management team for PSEG Long Island be named?
The PSEG Long Island senior management team is expected to be named during the second half of 2012. This team will provide continuity through the transition phase and during the operating phase.
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C6. What is the process for designing the new organization?
In preparation, the PSEG Long Island team will extensively interact with LIPA and National Grid during the transition phase to better understand the LIPA system and how it is currently managed by National Grid. This includes assets, facilities, organization design, workforce and more.
Also during this transition phase, PSEG Long Island will partner with LIPA to design ServCo. This design process will include determining the appropriate structure, staffing levels and the types of positions needed.
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C7. Will the new organizational design mirror what is currently in place?
The organization will be designed so that the functions required to meet LIPA’s business needs are housed within ServCo. Some areas of the new design will likely be similar to what is now in place, especially in areas that are already dedicated to the LIPA electric service. Others areas will require a more detailed review to determine the appropriate design. This includes areas that currently operate as shared services with other parts of National Grid’s businesses: for example, the Call Center, Meter Services and support functions (including Information Technology, Human Resources and Finance).
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C8. How can anyone expect all of T&D to be physically and logically separated from National Grid within two years? It would involve security, HVAC, networks, offices, building leases, applications, etc.
Yes, there is a lot of work to be done. However, PSEG is working closely with the National Grid team and expects to complete all aspects of the transition – from security to applications – on time. PSEG has solid experience managing systems and has successfully completed merger and acquisition activity with similar challenges. PSEG has subcontracted with Lockheed Martin, who will have an active involvement in the transition of the IT Operations and back-office support services. Lockheed Martin has extensive experience with complex transitions.
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Service:
D1. Will there be improvements to customer service under the new contract?
PSEG is one of the leading utility providers in the nation in terms of customer service. J.D. Power & Associates highly ranks PSEG for both reliability and customer service.
LIPA and PSEG will aggressively pursue improvements in customer service. The contract between LIPA and PSEG includes a number of customer service improvement metrics, including year-over-year improvement in the number of customer calls resolved in just one call transaction, the average speed of answering customer calls and customer satisfaction survey question responses (measured by a third party). PSEG has committed to strive to achieve first quartile customer service performance. And, the contract includes other performance metrics, such as electric service reliability target, energy efficiency targets and operating / capital budget targets.
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D2. Is PSEG committed to energy efficiency and renewable initiatives?
Like LIPA, PSEG has been a leader in renewable energy and efficiency initiatives in their service territory.
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D3. Will there be any change in my service now?
No. Customers will contact and conduct business with LIPA in the same fashion as you are currently.
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D4. Will I receive my electric bill from LIPA and my gas bill from National Grid?
Yes. After the transition, customers on Long Island will continue to receive their electric bill from LIPA and will receive a separate gas bill from National Grid, which will continue to own and operate its gas distribution business on Long Island. They will be separate entities providing separate services.
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D5. What is the difference between electric and gas management?
Starting on January 1, 2014 PSEG Long Island will replace National Grid as the operator of LIPA’s electric T&D system. National Grid will then continue to own and operate its gas business on
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Employees:
The organizational design is expected to be completed during the second half of 2012. The transition team is developing the process that will be used to staff the organization and the timeline for key decisions to be made. National Grid employees will be kept informed of developments, as soon as practicable.
Actual staffing is expected to be done during the second half of 2013. This step will include the identification of National Grid employees to be transitioned to ServCo. PSEG Long Island will work with National Grid and LIPA to provide as much information as soon as possible during this period.
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E2. What will happen to those National Grid employees currently providing services to LIPA once the new contract is in effect?
LIPA and PSEG Long Island are strongly committed to maintaining an experienced workforce on Long Island. The new contract requires that PSEG Long Island offer employment to National Grid union employees who, on an equivalent full-time basis, are now serving the LIPA T&D System. The contract also requires PSEG Long Island to offer employment to National Grid non-union employees who are needed to perform services for LIPA.
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E3. Will the new Service Provider honor the union bargaining agreements?
Yes. PSEG Long Island will honor all existing union contracts.
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E4. How does the new contract affect employee pensions?
How will National Grid retirees be affected?
National Grid retirees will not be affected. They will continue to be covered under the National Grid retirement programs.
When will details about ServCo pension benefits be available?
With the transition period under way, pension and benefit plans are being reviewed. Additional information will be shared with employees as soon as the details are finalized.
How will employees who transition from National Grid to ServCo be treated under National Grid’s retirement programs?
Employees who are hired by ServCo (“Transitioned Employees”) will continue to participate in the National Grid plans, based upon the provisions of those plans, through the date they end employment with National Grid. From then on, Transitioned Employees will no longer accrue benefits under the National Grid plans.
How will employees’ previous service with National Grid and its predecessors on Long Island be considered under the ServCo plans?
A Transitioned Employee’s previous service with National Grid (and for which National Grid has granted past service credit with another company) will be taken into account for purposes of eligibility, participation, vesting, attainment of retirement dates and more. Additional information will be made available as the details are finalized.
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E5. How does the new contract affect employee benefits? Will ServCo establish its own employee benefit plans?
Yes. Transitioned employees will be eligible to participate in the new employee benefit plans, which ServCo will establish. The new employee benefit plans for union employees will be designed to comply with the requirements of the applicable collective bargaining agreement. Because there are multiple benefit plans to be reviewed, the new employee benefit plans for non-union employees will be developed during the transition period. As these benefit plans are developed, what is currently being provided in the existing benefit plans will be reviewed and compared to PSEG’s plans and other benefit packages in the marketplace to ensure that the new benefits package is a competitive package that can attract, retain and motivate the workforce. Additional information will be made available as details are finalized.
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E6. After the operations period commences, how will staffing changes and compensation (including any incentive compensation) be adjusted?
Like any business, PSEG Long Island management will be responsible for preparing and recommending a budget that enables it to meet its performance objectives – providing safe, reliable electric service, high customer satisfaction, and other performance targets, all within the realities of a prudent budget. PSEG Long Island will propose staffing levels and compensation packages that can attract, retain and motivate a talented workforce to achieve LIPA’s business goals. PSEG Long Island will review that plan with the LIPA management team, whose Board has the ultimate authority to approve the budget.
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E7. What is PSE&G’s benefits package like?
PSEG’s benefits can be viewed as a visitor at http://www.pseg.com/benefits. Visitors are cautioned that the benefits package for new ServCo employees, which will be developed as discussed above, may differ from PSEG’s existing plans. The PSEG benefit information is being made available in the spirit of transparency.
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E8. Will the non-union ServCo employees be offered the protection of a 10-year contract?
Today, employees who are in non-union positions are not covered by a contract and are employed at will. This will continue to be the case for all transitioned non-union ServCo employees.
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E9. What communications should employees expect during the transition period?
PSEG Long Island is committed to informing National Grid employees of major decisions, as soon as feasible during the transition period and will coordinate its communications to National Grid employees and the public with LIPA and National Grid.
The PSEG Long Island management team looks forward to meeting as many National Grid employees as possible during the transition period and is working with National Grid and LIPA to determine the most appropriate means to engage National Grid employees to discuss the transition process and its vision for the business. It is envisioned that such engagement will likely be introductory in the early stages of transition and become more substantive and frequent as the transition period progresses and the organizational design takes shape.
PSEG Long Island will also periodically add to this Q&A listing on LIPA’s Web site (www.ourlipafuture.info) and encourages National Grid employees to submit their questions through this Web site. PSEG Long Island greatly appreciates questions, ideas and feedback along the way and encourages National Grid employees to feel comfortable in asking questions and providing feedback. We will review each question and, where possible, questions will be answered and posted to the site. Please note that individual responses will not be able to be sent and questions related to individual situations may not be able to be addressed. Because this is still the very early stage of transition, there are many questions that cannot be answered at this point. PSEG Long Island asks for patience and understanding in this regard.
PSEG has a culture of transparency and believes in frequent, open communications with its employees. Current PSEG employee communications include interactive employee and union meetings, daily/weekly safety and operational briefings, company newsletters, an intranet site and an employee blog. The approach to ServCo employee communications after the transition is expected to be similar.
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E10. Will National Grid employees be given a choice of which company they will work for?
Because we are in the process of designing the organization and staffing plan, it’s too early to answer this question. We will review those plans with National Grid to coordinate and minimize disruption as best as possible. We’ll update this response when we have more specifics about the staffing process.
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E11. Where will the ServCo employees be located?
We don’t have an answer at this time. We are in the process of reviewing the existing facilities and will meet with National Grid to discuss this topic. We expect to use many of the existing facilities, as well as some others on Long Island. Our goal to have work facilities that minimize disruption during the transition, are cost-effective solutions and align with LIPA’s long-term objectives.Back to top
E12. Is PSEG presently recruiting for engineering positions to staff a subsidiary on
No. PSE&G is recruiting for a variety of positions to provide transmission, distribution and substation engineering services for the utility's
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E13. Does LIPA own any buildings or do they rent all the locations?
LIPA has rights to many facilities and systems currently owned and operated by National Grid. LIPA and ServCo are evaluating a plan of acquiring certain facilities from National Grid, as well as alternative sites. LIPA and ServCo expect to complete this analysis and continue discussions with National Grid about this effort in the coming months.
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