* Governor says state's energy system needs major overhaul
* Long Island power agency faces class action suit over Sandy outages
By Edith Honan and Ellen Wulfhorst
NEW YORK, Nov 13 (Reuters) - New York Governor Andrew Cuomo, frustrated with lengthy power outages since Superstorm Sandy, on Tuesday launched an investigation into the state's utilities, saying that failings exposed by the storm demand a major overhaul of the industry.
Public outcry over power companies' response to the storm may provide momentum to make long-overdue changes, Cuomo said at a briefing to mark the partial reopening of a tunnel connecting Brooklyn and Manhattan that was flooded in the storm.
When the storm struck on Oct. 29, there were widespread power outages. Power has been restored to hundreds of thousands of customers, but more than 130,000 customers still have no electricity or heat. Residents have complained of getting confusing or little information from the power companies.
Almost all of state-owned Long Island Power Authority's (LIPA) 1.1 million customers lost power in Sandy, and the utility, among the slowest to recover, has come under fierce criticism. On Tuesday, Michael Hervey, LIPA's embattled chief executive officer, announced his resignation.
"We can't go through something like this again. We shouldn't go through something like this again, and learning from it is very, very important," Cuomo said. "I believe something like this is going to happen again. I think we need to be better prepared."
Cuomo said he signed an executive order creating a commission to investigate the response, preparation and management of the power companies and to recommend ways to reform the industry's oversight and management. Changes would have to be approved by the New York Legislature, he said.
"You're talking about a whole bureaucracy that has to be changed," he said. "I don't believe you can fix it. I believe it has to be overhauled and you need a new system."
The commission will investigate the New York Power Authority, LIPA, the New York State Energy and Research Development Authority and the Public Service Commission that regulates a number of utilities, including the publicly traded Con Edison Inc., which supplies power to New York City and its northern suburbs.
Attorneys filed a class-action lawsuit against LIPA on Tuesday on behalf of Long Island residents, claiming it failed to replace an "outdated, obsolete" management system for dealing with large-scale power outages.
The lights flickered on Tuesday at a public housing complex in the Brooklyn neighborhood of Coney Island, which has been without power since Sandy struck.
"Let there be lights! Lord Jesus! Sixteen days without lights," resident Blanca Martin, 41, said as she let out whoops of joy and did a little dance.
Another resident, Jawhar Edwards, 28, called the past two weeks "unbearable."
"It feels like we have no help," he said.
LIPA said more than 84,000 homes and businesses will stay dark due to saltwater flooding that could have damaged wires, outlets and appliances, making it unsafe to restore electricity.
Utilities say those homes and businesses must be inspected, repaired and certified before service can resume.
Con Ed said it had about 16,300 such customers, and in New Jersey, Jersey Central Power and Light utility has said about 30,000 customers that could not yet have power restored.
President Barack Obama is expected to survey the damage in New York City on Thursday.
The president toured storm-ravaged areas of New Jersey ahead of last week's election with Republican Governor Chris Christie, whose strong praise for Obama's storm response was seen as helping boost his showing at the polls.
Mayor Michael Bloomberg said the city's gas-rationing system, under which cars with odd- and even-numbered license plates can fill up only on alternate days, would continue for at least another five days, at which time officials would assess the situation.
He said the program, put into place on Friday morning, has succeeded in shortening lines at gasoline stations. Since Sandy, the region has faced severe fuel shortages due to power outages and inventory stranded at refineries and terminals.
New Jersey's similar gas-rationing system, launched on Nov. 3, ended on Tuesday morning.
Commuters' headaches were easing slightly, as PATH trains that connect New York and New Jersey resumed some limited service on Tuesday, and some trains on the Long Island Rail Road began to roll. But two of New Jersey Transit's major train lines remained suspended.