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Matter of Standing for Truth About Radiation (STAR)
Found. v Long Is. Power Auth.
2002 NY Slip Op 30151(U)
September 27, 2002
Sup Ct, Suffolk County
Docket Number: 24263-2001
Judge: Robert A. Lifson
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[* 1]
M E M O R A N D U M
Supreme Court of the State of New York,
County of Suffolk                                                                                           Index No. 24263-2001
In the                                                                                                      of the Application of STANDING
FOR TRUTH ABOUT RADIATION (STAR)
FOUNDATION, NEW                                                                                             STATE
ASSEMBLY MEMBER FRED THIELE Jr.,
CITIZENS ADVISORY PANEL (CAP),
                                                                                                            Petitioners,                                         By: Hon. Robert A. Lifson
                                                                                                            For a judgment pursuant to Article 78 of the Civil
                                                                                                            Practice Law and Rules,
                                                                                                            -against-                                            Dated: September 27,2002
                                                                                                            THE LONG ISLAND POWER AUTHORITY,
                                                                                                            Respondent.
SCOTT M.                                                                                                    ESQ.                                                 RADLER, LLP
                                                                                                            Attorney for Petitioners                             Attorney for Respondent
PO Box 4206                                                                                                                                                      Plaza
                                                                                                            East Hampton, NY 11937                               Uniondale, NY 11556
In an article 78 proceeding wherein the petitioner sought to compel the respondent to divest
itself of its interest in a nuclear powered generating facility (Nine Mile Point   Nuclear Reactor)
located in Oswego County  allegedly as was mandated by Public Authorities Law                               this
court denied the respondent's motion to dismiss and granted the petition to the sole extent of
ordering an evidentiary hearing to determine several questions pertaining to whether the actions of
the respondent in not disposing of its interest were either in direct violation of a statutory mandate
or were otherwise arbitrary and unreasonable. The court, by order dated January 14,2002, directed
certain exhibits to be produced to assist the court in determiningthe legislative history and legislative
intent to discern whether the Public Authorities Law                                                        1020- ee permitted the respondent to consider
the potential negative economic impacts in determining the appropriate value to be accepted in
disgorging its interest in the Nine Mile  nuclear generating facility. Public Authorities Law
ee provides as follows:
The authority [LIPA] shall make every effort to convey its interest in the Nine Mile
Point   nuclear generating facility through the sale of its interest in such facility to
the power authority of the state                                                                            York or to one or more of the co-tenants of




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Standing for Trust about Radiation v. LIPA                                                                 Index No. 24263-2001
Page 2
such plant, provided, however, that in any acquisition of such interest by the power
authority of the state of New York or one or  more of the co-tenants, the authority
shall agree to remain responsible for the purchase of such share o f t he p ower
generated by such facility as it is required to purchase under agreements entered
into by LILCO and obligating the authority.
Perhaps it is an over simplification of the issue, but it appears that the petitioner asserts that
the legislative enactment of Public Authorities Law                                                        1020-ee left the respondent with no discretion
and required an immediate disposition regardless of the economic consequences. The respondent
takes the contrary position, that consideration of economic factors was explicitly, if not implicitly,
mandated by the legislative grant and that,  accordingly, the utilization of economic factors in
deferring the sale of the asset in question was proper.
A hearing was held and concluded on May 3 1,2002. The petitioner called Mr.                                an
attorney who the court nonetheless deemed an expert on public utility rate analysis and the
economics of the power industry. He testified that in 1986 Nine Mile   cost about 6 billion dollars
but that it was anticipated it would only be capable of producing 1.5 billion dollars of power. In his
expert opinion, in 1986 when the legislation at issue was passed, Nine Mile 11 had no value.  Based
on his analysis, 90 million dollars previously offered to LIPA was a fair value and should have been
accepted. He testified that he believes that LIPA’s position, to wit, that said offer is at least 100
million                                                                                                    below the value of its interest in the facility is untenable.  The witness strongly
contests the economic analysis undertaken by LIPA, the application of the facts found, and the
conclusions reached.
On cross examination, the respondent put in question Mr.                                                   expertise particularly as
it might pertain to decommissioning a nuclear power facility. The witness stated that he believes the
so called LIPA law (Article 5 of the Public Authorities Law) was intended to close the nuclear
facility at Shoreham, New York, to promote energy conservation and to promote savings in rates.
The respondents attempted to get this witness to concede that the LIPA law was enacted solely to
promote savings in electric rates.
The court also heard                                                                                       Mr. Hulkower, the chief operating officer of LIPA. He testified
that the LIPA law was enacted to shut down                                                                 nuclear facility and to promote economies
in utility rates on Long Island. As a result, the conceded obligation to sell LIPA’s interest in Nine
Mile 11 must take into account LIPA’s statutory mission to keep rates low. He stated that acceptance
of an inadequate or insufficient offer to purchase LIPA’s interest in Nine Mile 11 could only be
rectified by an increase in utility rates. He also testified to the composition of the LIPA board. Since
that body is in some fashion appointed by the Governor and the each of the respective houses of the
State Legislature, the ability                                                                             bodies to compel their will is self-evident. Mr. Hulkower stated
that LIPA has an 1 8% interest in Nine Mile   and is therefore entitled t o 1 8% o f t he power
generated. Loss of this source of power must be made up by additional generating capacity on Long
Island which is not existent or by purchasing such power elsewhere. This replacement of the lost




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Standing for Trust about Radiation v. LIPA                                                               Index No. 24263-2001
Page 3
power has an attendant cost that also impacts the rates to be imposed.
Notwithstanding the foregoing, Mr. Hulkower stated that LIPA would accept any offer at or
above LIPA’s “break even” point which he fixed as 222 million dollars. The legislatively mandated
lists of approved potential purchasers have never offered such sum.
On cross examination, the petitioner attempted to show that the “break even” number was
grossly inflated.  Petitioner also tried to get Mr. Hulkower to concede the potential risk of
maintaining its interest in Nine Mile 11 should result in a substantial discount of the “break even”
number. Ultimately, Mr. Hulkower conceded that there has never been a public hearing on this issue
or a vote of the board to consider any offers because none were deemed to have sufficient merit to
warrant board consideration. On redirect, Mr. Hulkower said LIPA would sell its interest, if it could,
but that the prevailing economic circumstances do not make that possible.
The court also heard the testimony of Mr. Gillette, an employee of                                       a witness the
court deemed an expert on nuclear emergencies as well as utility cost analysis. He admitted that the
so called “break even” number varied greatly. He testified that the price of power has been very
volatile and that such volatility had a direct impact on the “break even” number. Basically, as the
cost of power increases, the higher the cost in replacing the power generated by Nine Mile 11 that
LIPA was supplying to its customers. He also reiterated that LIPA was ready to sell its interest, but
not at any price.
Based on the foregoing testimony and the submissions made to the court, it would appear that
the legislative intent was muddled and, to some extent, involved conflicting objectives                  lower
rates vs. decreasing dependency on nuclear generated power). However, the paramount purpose for
the creation of LIPA ostensibly was to assure an adequate supply of gas and electricity in a reliable,
efficient and economic manner in order to preserve the economic vitality of the region - a matter of
state  wide import. See: Long                                                                            Co. v. Suffolk                 1 19                                    128,505
956 (Second Dept., 1986). As the Court of Appeals so aptly noted, although
“...closure of Shoreham [nuclear generating facility on Long Island] was one of the
overriding engines driving the emergency legislative initiative and package ... We
emphasize that the recurring and unavoidable theme reflected in the legislative
history is that the intended sine qua non objective of the Act was to give LIPA
the authority to save ratepayers money by controlling and reducing utility
                                                                                                         costs (Bill Jacket, Assembly                                           at 14; id., Budget Report, at 6; id., Executive
                                                                                                         Approval                       at 12; id., Executive                   at                                                (emphasis added)
Citizens for an Orderlv                                                                                                                 Policv. Inc. v. Cuomo, 78                                                                 398, 576           185 (1991).
Since economics appears to be the justification for the passage of Article 5 of the Public Authorities
Law, the section in question cannot be read outside the context of that ostensible legislative
objective. Indeed, the language                                                                          Authorities Law                1020-ee does not mandate an immediate
sale, but only mandates efforts to convey; it then ominously states that LIPA is obligated to purchase




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Standing for Trust about Radiation v. LPA                                                                 Index No. 24263-2001
Page 4
the power lost by such sale. Such obligation poses the question - where is LPAto acquire the power
lost through such divestiture and at what cost? The legislature having declared what, at best, is a
contradictory policy delegated its implementation to the public entity established,to wit, LIPA. This
approach has expressly been judicially sanctioned.  As the Court of Appeals explicitly held in
Citizens for an Orderlv                                                                                                                                                          Policv. Inc. v. Cuomo, supra.:
                                                                                                                                                                                 “The Legislature may, however, declare its policy in general terms by statute,
                                                                                                                                                                                 endow administrative agencies with the power and flexibility to fill in details and
                                                                                                                                                                                 interstices and to make subsidiary policy choices consistent with the enabling
                                                                                                          legislation   citations omitted] ...T he                                                                                                                                                                                   is not required in its enactments
                                                                                                                                                                                 to supply agencies with rigid marching orders, especially in a field as complex as
                                                                                                                                                                                 nuclear power regulation, which is ‘‘simplyincapable of statutory completion’’ and
                                                                                                                                                                                 “where flexibility in the adaptation of the legislative policy to                                                                                   variable
conditions                                                                                                                                                                       the very essence [of the Act]” (Matter                                                                                                              v. Kahn,
47                                                                                                                                                                                                                                                                     The intricate nuances of the policy determinations required
                                                                                                          under the LIPA Act deserve some respect                                                                                                                      the Court. The specialized entity,
                                                                                                                                                                                 was created by the Legislature to concentrate on and resolve these matters
within a reasonably                                                                                                                                                                                                                                                    and delegated range of  expertise (see, Matter of
Memorial                                                                                                  v.                                                                     68                                                                                    958,                                                          960;  Matter  of  Great
                                                                                                          Lakes-Dunbar-Rochester v. State                                        Commn., 65                                                                                                                                          339,343). The wisdom
and prudence of the Legislature’s flexible approach are not ours to question.”
it has been a long established principle of administrative law that any agency’s
interpretation of its statutory mandate will not be judicially altered if it is supported by a rational
basis or such interpretation is manifestly untenable or otherwise improper.  Claim of Gruber, 89
                                                                                                          225,652                                                                589 (1996); Albano v. Board of Trustees                                               York                                                          Fire Dept.,
286                                                                                                       734,730                                                                159 (Second Dept., 2001). Here, the determination by LIPA that the
legislature did not intend a “fire sale” of its interest in Nine Mile 11 has a reasonable basis in fact
because, to effect a sale greatly below the fairly determined value of the asset, whether based on
market value analysis or a replacement value analysis, would have a potential negative effect on the
rate structure                                                                                            to the primary objective of Article 5 of the Public Authorities Law.
The facts adduced here shows that the action of the respondent did not violate the statutory
mandate. The imposition of economic criteria was not arbitrary or unreasonable and fell well within
the parameters of that which was required by the legislative scheme. The only possible impropriety
that can be discerned is that the employees of the board either took it upon themselves to screen
“unworthy” applications to purchase                                                                       the board’s consideration or otherwise failed to place
before the board consideration of the Nine Mile 11 divestiture before the board on a regular recurring
basis (monthly, annually, biennially, etc.). Nonetheless, there is no indication that had they done so
the board would have approved a sale of its Nine Mile  assets substantially below the  break even”
number generated by these employees.
In the last analysis, if the Legislature intended otherwise,  it can speedily remedy the
misapplication of its desires by putting members on the LIPA Board who are more aggressive in




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Standing for Trust about Radiation v. LIPA                                                              Index No. 24263-2001
Page 5
pursuing divestiture or even by enacting new legislation that dictates an immediate divestiture of
LIPA’s interest in any nuclear generating facility. The failure of the legislature to in any way take
any action is telling.
For the reasons stated herein, the petition is dismissed provided the judgment to be entered
provides for the respondent Board to entertain on a recurring basis the issue of divestiture of its
interest in Nine Mile
Settle judgment.
J.S.C.

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