By Scott Malone

BOSTON, Jan 28 (Reuters) - Millions in the U.S. Northeast on Wednesday started digging out from a powerful blizzard that dumped up to 3 feet of snow and led to coastal flooding around parts the region, while largely bypassing New York City.

Snow was forecast to continue falling in the area throughout the morning, although the National Weather Service had lifted blizzard and winter storm warnings across New England.

In Massachusetts, which was hit particularly hard, a record-breaking 34.5 inches (88 cm) of snow fell in Worcester, and the 24.4 inches (62 cm) at Boston's Logan International Airport approached record proportions, NWS officials said.

Massachusetts lifted a statewide driving ban at midnight on Tuesday (0500 GMT on Wednesday). Boston-area trains, buses and subways were set to resume normal service, although delays were predicted for the morning commute.

About 12,000 customers across the storm-hit region were still without power as of early Wednesday, according to local utilities, with the bulk of the outages on Massachusetts' Cape Cod and outlying islands.

On the resort island of Nantucket, more than half of homes and businesses had no electricity as of early Tuesday evening, and crews were working to restore it, Police Chief William Pittman said.

Storm-driven coastal flooding added to the state's woes as low-lying towns south of Boston grappled with rising water.

High tides breached a seawall in Marshfield, about 30 miles (50 km) south of Boston, and damaged 11 homes, several of which were condemned, police said. Police urged residents to evacuate.



Further south, New York, New Jersey and Connecticut escaped the worst of the storm, despite dire predictions by meteorologists and officials.

Travel bans in those states were lifted on Tuesday, and New York City's subway system restarted after being closed for 10 hours.

The severe weather claimed the lives of at least two people. Police in Trumbull, Connecticut, said an 80-year-old man collapsed while shoveling snow and died on Tuesday at a nearby hospital.

Police said a teenager died late on Monday when he crashed into a lamppost as he was snow-tubing in the New York City suburb of Suffolk County, on the east end of Long Island, which had more than 2 feet of snow in places.

New Yorkers were divided on whether Governor Andrew Cuomo and New York City Mayor Bill de Blasio had overreacted ahead of the storm. Cuomo had ordered a travel ban on all roads in the southern part of the state, while the subway system closed for the first time in history due to snow.

"I have seen the consequences the other way," he said. "I would rather be in a situation where we say 'we got lucky.'"

The heaviest snowfall was recorded outside Boston, with 36 inches (91.4 cm) in the Massachusetts cities of Lunenburg, Hudson and Auburn, according to the NWS.

More than 4,700 U.S. flights were canceled on Tuesday, according to More than 80 percent of those scheduled at airports in New York, Philadelphia and Boston were affected. (Additional reporting by Curtis Skinner in San Francisco; Editing by Lisa Von Ahn)