Can a Long Island town set up its own electric utility to buy cheaper power for residents?

Plain-English summary

Southold wanted to do what was then a popular idea in deregulated electricity markets: form a municipal aggregator that would buy cheaper power on the wholesale market and resell it to residents, using existing utility transmission lines. Article 14-A of the General Municipal Law gives municipalities broad authority to operate public utility services. Southold asked the AG whether that statutory authority could be exercised within the former LILCO service area, where the Long Island Power Authority had taken over.

The AG said no, not without LIPA's agreement. The reasoning is preemption. When the State created LIPA under Article 1-A of the Public Authorities Law to replace LILCO, the Legislature assigned LIPA "exclusive responsibility" under § 1020-g(n) to serve as the gas and electric service provider in LILCO's former territory. § 1020-h(1)(a) declared LIPA's public use of the former LILCO property "superior to the public use of such property by any other person, association, or corporation." That language, the AG read, was a complete statutory occupation of the field for the LIPA service area.

The Article 14-A authority survives, but it is structurally subordinate to LIPA's framework on Long Island. § 1020-f(t)(ii) authorizes LIPA to transfer its assets to municipal electric agencies established under Article 14-A, but only on terms LIPA determines to be in the best interest of ratepayers. § 1020-g(j)(iii) authorizes LIPA to enter contractual arrangements with private utilities or public entities concerning transmission facility use. Both routes require LIPA's voluntary participation. A town cannot self-help its way into a municipal utility by invoking Article 14-A and condemning transmission lines.

The AG had reached the same conclusion the prior year in Op Atty Gen (Inf) No. 98-13, rejecting condemnation as a tool, and cited the Second Department's decision in Long Island Lighting Co. v County of Suffolk for the broader proposition that local action cannot override comprehensive State preemption.

Currency note

This opinion was issued in 1999. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

What is LIPA?

The Long Island Power Authority, a public-benefit corporation created in 1986 to replace LILCO. The Legislature, frustrated with LILCO's Shoreham nuclear plant cost overruns, restructured the Long Island electric system, with LIPA acquiring LILCO's transmission and distribution assets. LIPA contracts with operators for day-to-day service.

Why isn't LIPA preemption obvious from the statute?

The Article 14-A authority for municipal utilities was enacted earlier and looks broad on its face. Without preemption analysis, a town could read § 360(2) literally and conclude it has authority to set up an aggregator anywhere in New York. The AG's job was to harmonize the two statutes; the more specific, more recent LIPA statute won.

Could LIPA voluntarily transfer to a town?

Yes, but in its sole discretion. § 1020-f(t)(ii) is the express transfer authority. A municipality wanting to form an aggregator within LIPA territory has to negotiate with LIPA, not bypass it.

Does this apply outside Long Island?

No. Article 14-A authority exists statewide. The LIPA preemption is geographic, limited to the former LILCO service area on Long Island. Municipal aggregation has since proliferated upstate in non-LIPA territory through Community Choice Aggregation programs authorized by the Public Service Commission, though those operate within the regulated-utility framework rather than as standalone municipal utilities.

What was a "public utility service" supposed to do?

Under Article 14-A, a municipality could acquire, construct, lease, or operate facilities to provide service "similar to that furnished by any public utility company specified in article four of the public service law." Southold's intended use was as an energy broker without infrastructure, contracting with the existing LIPA transmission system. That role is what the AG found preempted.

Background and statutory framework

General Municipal Law Article 14-A (§§ 360 et seq.) authorizes municipal public utility services. § 360(2) gives broad authority to construct, lease, purchase, own, acquire, use, or operate any public utility service. § 360(6) authorizes acquisition by purchase or condemnation. The article was originally designed for cities and villages running their own water, gas, or electric utilities, with a small number of municipal electric companies persisting from earlier eras.

Public Authorities Law Article 1-A is the LIPA enabling statute. § 1020-a declares the legislative purpose of replacing LILCO. § 1020-f sets out LIPA's general powers including the asset-transfer authority. § 1020-g is the operational authority, with subsection (n) the franchise-takeover provision. § 1020-h establishes LIPA's interest in former LILCO property.

The Court of Appeals' broader doctrine on State preemption of local regulation (most clearly articulated in cases like People v De Jesus and Albany Area Builders Assn v Town of Guilderland) treats comprehensive State statutory schemes as implicitly preemptive even without express preemption language. The AG applied that doctrine here.

Citations

• General Municipal Law § 360 (municipal public utility services).
• General Municipal Law § 360(2) (powers to construct, lease, purchase, operate utility).
• General Municipal Law § 360(6) (acquisition by purchase or condemnation).
• Public Authorities Law § 1020-a (LIPA legislative purpose).
• Public Authorities Law § 1020-f(t)(ii) (LIPA may transfer assets to municipal electric agency).
• Public Authorities Law § 1020-g(j)(iii) (LIPA contractual arrangements with private/public entities).
• Public Authorities Law § 1020-g(n) (LIPA exclusive franchise and service responsibility).
• Public Authorities Law § 1020-h(1)(a) (LIPA's public use of former LILCO property is superior).
• Long Island Lighting Co. v County of Suffolk, 119 AD2d 128 (2d Dept), lv denied, 68 NY2d 607, appeal dismissed, 68 NY2d 802 (1986) (preemption of local action by State statutory scheme).
• Op Atty Gen (Inf) No. 98-13 (municipality may not condemn LIPA assets to operate municipal utility).

Source

• Landing page: https://ag.ny.gov/libraries-documents/opinions/opinions-year
• Original PDF: https://ag.ny.gov/sites/default/files/opinions/I_99-27_pw.pdf

Original opinion text

Opn. No. 99-27
GENERAL MUNICIPAL LAW, ART 14-A, § 360; PUBLIC AUTHORITIES LAW, ART 1-A, §§
1020-a, 1020-f, 1020-g, 1020-h.
A municipality located within the Long Island Lighting Company's former service area may not
establish a public utility service to provide gas or electric power without the Long Island Power
Authority's agreement.
September 30, 1999
Gregory F. Yakaboski, Esq.
Town Attorney
Town of Southold
P. O. Box 1179
Southold, New York 11971

Informal Opinion
No. 99-27

Dear Mr. Yakaboski:
You have advised us that the Town of Southold desires to form a "public utility service" pursuant
to Article 14-A of the General Municipal Law. The Town would use this public utility service to
purchase low cost electric power on the open market and distribute this power to the residential and
commercial users in the Town of Southold. The public utility service would own no infrastructure,
relying entirely upon transmission and distribution lines owned by the Long Island Power Authority
("LIPA"). In this respect, you have stated that the Town public utility service would act as an "energy
broker." The Town is within the former service area of the Long Island Lighting Company ("LILCO").
You have inquired whether the Town has the authority under Article 14-A of the General
Municipal Law to form a public utility service given the creation and existence of LIPA; and how
LIPA's enabling statute would affect the powers of such a public utility service, including the use of
LIPA transmission lines.
Municipalities have broad authority to establish public utilities. Pursuant to General Municipal
Law § 360(2), a municipal corporation may
construct, lease, purchase, own, acquire, use and/or operate any public utility service within
or without its territorial limits, for the purpose of furnishing to itself or for compensation to
its inhabitants, any service similar to that furnished by any public utility company specified
in article four of the public service law. For such purpose, any municipal corporation may
purchase gas or electrical energy from the state, or from any state agency, or other
municipal corporation, or from any private or public corporation.
General Municipal Law § 360(6) provides that a municipal corporation may for such purpose acquire
the public utility service of any public utility company within or without its territorial limits by purchase
or condemnation.
The above provision must be applied taking into consideration LIPA's legislative authority. LIPA
was created pursuant to Article 1-A of the Public Authorities Law to replace the privately owned LILCO

with a publicly owned power authority. See, Public Authorities Law § 1020-a. The Town of Southold
formerly was served by LILCO. Id.
Public Authorities Law § 1020-g(n) provides that "LIPA shall acquire from LILCO all franchise
and utility service responsibilities for all ultimate consumers of gas and electricity within LILCO's
former service territory, including the responsibility to provide safe and adequate service." Section
1020-h(1)(a) sets forth a legislative determination that the public use of the former LILCO property by
LIPA is "deemed to be superior to the public use of such property by any other person, association, or
corporation." Therefore, LIPA has the exclusive responsibility to ensure safe and adequate public utility
service in LILCO's former service area, which includes the Town.
LIPA is empowered to transfer any of its assets to one or more municipal electric agencies
established pursuant to Article 14-A of the General Municipal Law, for such consideration and upon
such terms as LIPA may determine to be in the best interest of the electric ratepayers in the service area.
Public Authorities Law § 1020-f(t)(ii). Section 1020-g(j)(iii) empowers LIPA to cooperate with and
enter into contractual arrangements with private utility companies or public entities "with respect to the
construction, acquisition, ownership, operation and/or use of transmission facilities."
The Attorney General has previously concluded that a municipality in the service area of LIPA
may not condemn the transmission and distribution system, facilities and other assets of LIPA and use
them to operate a municipal utility pursuant to Article 14-A of the General Municipal Law. See, Op Atty
Gen (Inf) 98-13. We concluded that the LIPA enabling act is a "specific statutory scheme which
preempts the field, and cannot be overridden by inconsistent local legislation or other local action." See
also, Long Island Lighting Co. v County of Suffolk, 119 AD2d 128 (2d Dept), lv denied, 68 NY2d 607,
appeal dismissed, 68 NY2d 802 (1986).
In our prior opinion, we stated as follows:
The [LIPA] statute clearly establishes that LIPA, upon exercising its right to purchase the
assets or securities of LILCO, in its sole discretion, may transfer acquired assets to
municipal utilities or enter into cooperative or contractual arrangements with municipalities
in the service area . . .. Only LIPA is authorized to determine whether assets should be
transferred and the terms and conditions of transfer.
Therefore, we conclude that a municipality located within LILCO's former service area may not
establish a public utility service to provide gas or electric power without LIPA's agreement. LIPA has
exclusive authority to ensure power in LILCO's former service area. LIPA may, in its sole discretion,
enter into contracts with municipalities providing for transfer of any of its assets to a municipal electric
agency established pursuant to Article 14-A of the General Municipal Law and permitting construction,
acquisition, ownership, operation and/or use of transmission facilities.
The Attorney General renders formal opinions only to officers and departments of the State
government. This perforce is an informal and unofficial expression of the views of this office.
Very truly yours,
WILLIAM E. STORRS
Assistant Solicitor General