I worked for RG&E and the electric utility industry for decades. Using any public money from taxpayers would be a colossal waste. I’m willing to give you the answer for free. It can’t be done.
First, Metro Justice and other left-leaning not-for-profits have dreamed of taking over RG&E for as long as I can remember.
Legislatures that approved utility deregulation made a disastrous decision. I challenge supporters of deregulation to show a single example where deregulation led to better consumer outcomes. It’s vital to understand that electric generation was severed from all other utility functions through deregulation. It also created the Independent System Operator (ISO) function as an independent entity. In contrast, before deregulation, all utilities managed the operation to ensure reliable and low-cost power to consumers. During the same period, electric power plants that still used coal or low-grade oil were forced to close and be demolished. Recently two clean, safe, and reliable nuclear power plants downstate were shuttered chiefly for political reasons. In practical terms, this means there is virtually no excess power in New York that doesn’t require natural gas as a fuel. The dream that NY would get cheap and plentiful hydropower from Canada and then be transmitted hundreds of miles to downstate NY has yet to materialize, and it’s doubtful that power will be available anytime soon, if ever. As attractive as wind and solar are, less than 3% of NY’s power comes from these sources.
Why is this important? No matter who operates the utility company, the cost will be the same for electricity consumers. And, as the climate changes and becomes warmer and less predictable, consumers will need more electric power, especially if electric cars and heat pumps are adopted in significant numbers. Since RG&E and its affiliates and owners don’t generate electricity, they must compete for power on the open market, and utilities that use more power get better deals. If no new large power plants are built, electricity will be generated by natural gas turbines that not only emit greenhouse gases. They are also expensive to operate. The price of electricity will keep increasing no matter who runs RG&E.
The second factor is that whatever a study shows, any new public power entity would need to buy RG&E at a fair market price which undoubtedly would be more than a billion dollars that taxpayers would be on the hook for, for many, many years to come. On top of the purchase price, there would be the added cost of operations, benefits, pensions, legal fees, and other unexpected expenses. If they could pull off the purchase, they would still need the technical expertise of current RG&E employees. And one of the advertised benefits of deregulation and RG&E joining with NYSEG was the elimination of duplication of many support activities, which would be severed, and would need to be added to new expenses a public power entity would have to pay for upfront. Most likely tens of millions of dollars. I don’t have access to the current data, but I’m confident my estimates are close. Who would manage the new company? Is anyone in Rochester or Monroe County qualified to manage and operate an electric utility? It makes much more sense to get Avangrid to allow a few citizens to sit on the board of directors to provide additional unfiltered insight to make better consumer-oriented decisions.
One more complication. RG&E serves multiple counties outside of Monroe County and the City of Rochester. It is between 6 and 9 counties. All of those counties would need to sign an agreement to buy RG&E. Would their citizens want to add debt to their budgets for future decades?
Since it’s never been done in this state, I suspect no senior managers were prepared for the complexity and cost of merging multiple companies. Although the excuse for COVID is beginning to ring hollow, it is a legitimate reason for poor billing performance because no meter readers went to people’s homes to read meters. With the changing workplace and the rollout of new computer systems and automated meters, staff consolidations caused significant operational challenges.
I am wondering who is responsible for all the deferred maintenance and upgrading of vital electric and gas infrastructure. If previous management knew they were selling the company and wanted to make it look attractive by not adding significant expense to their budget and letting the new owners make decisions, or if the new owners didn’t want to start with massive debt and rate increases to upgrade an aging system is anyone’s guess.
Adding complication to the equation is that many former RG&E employees with significant expertise and knowledge were offered buyouts, and many reached retirement age and left the new company without the necessary expertise to operate the system effectively being transferred. More complexity was added as power stations that helped provide a balanced electric system were retired, requiring new transmission lines to be added to keep all parts of the system reliable and safe.
These factors and others made for a rocky transition and will likely continue for several years.
I can guarantee that even with up-to-date numbers, taxpayers would not support the massive cost of underwriting the acquisition of RG&E. For argument’s sake, buying RG&E would cost two billion dollars. And let’s say that cost would be divided by a million and a half citizens; that would work out to 1,333 dollars per taxpayer, without interest or other charges to buy the company. I have no idea how much the operating expenses are, but I’m sure it can be found in the company’s annual report.
Creating a public utility has no financial benefit, and the ownership and operating expense would impact the poorest residents harder than other consumers. This effort is driven by people with no business or finance experience who dream of a world where electricity is cheap and plentiful, and the more humane approach they advocate would solve all the challenges of providing reliable and safe electric energy is a fantasy. Any expensive report will support all my conclusions, and it makes no sense to indulge the whim of activists by spending hard-earned taxpayer money, which won’t yield their desired results.
Frank Orienter is a retired Rochester Gas and Electric employee.