The Long Island Power Authority (LIPA) plans to acquire the Long Island Lighting Co. (LILCO), to help reduce LILCO's high electric rates and improve Long Island's economy. To that end, LIPA has formed a public/private partnership with a private utility company that will provide extensive management services for LILCO. The utility partner has agreed to invest $100 million in the acquisition, contingent upon Gov. Pataki's approval. LIPA would create a subsidiary to acquire LILCO using tax-exempt bonds. LILCO says this refinancing of over $5 billion in taxable bonds, combined with elimination of shareholder dividends and federal tax payments, would cause an immediate 7.5-percent rate cut. Moody's Investors Service cautions that the success of the offer remains highly uncertain, and that the offer does not appear to enjoy a high level of political backing in the state. Moody's says it is premature to change the negative direction of its current LILCO ratings.
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