PSEG Is Tapped To Manage Long Island Utility System

Public Service Enterprise Group Inc. (PEG) Thursday won a 10-year contract that could be worth more than $400 million to operate the electric utility system of the Long Island Power Authority in New York.

PSEG snagged the work from National Grid PLC (NG.LN, NGG), which has been operating the Long Island utility's electric grid and distribution system since 2004.

PSEG, based in Newark, N.J., will take over in January 2014, when National Grid's contract expires. Under the deal, PSEG would be paid $36 million a year in management fees, plus up to $5.4 million in incentives based on its performance serving customers and ensuring reliability of the electric system, according to PSEG. The contract also includes a clause that could increase those fees over the years.

PSEG would pass through the costs of operating the system directly to the Long Island utility, which is based in Melville, N.Y. and serves 1.1 million customers.

LIPA's board of trustees voted Thursday to award the contract to PSEG based on the company's record of premium customer service and reliability, its low-cost bid and corporate culture of transparency and local decision-making, among other factors, the utility said.

PSEG owns Public Service Electric & Gas Co., New Jersey's largest utility, which serves 2.2 million electric customers and 1.8 million natural gas customers. The company also owns unregulated power plants and other businesses.

-By Cassandra Sweet; Dow Jones Newswires; 415-439-6468; cassandra.sweet@dowjones.com

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