Of questionable utility

Time
was, if you wanted the scoop on Rochester Gas and Electric, you could look in
your own backyard — not only at the poles and wires near your home, but also
the corporate headquarters on East Avenue.

            But today you have to travel,
figuratively, to Ithaca, where RG&E’s corporate owner is headquartered. The
owner is Energy East, a pseudo-conglomerate with operations in Connecticut,
Maine, and Massachusetts, as well as New York.

            There’s an intermediate level of
governance you have to watch, too: RGS Energy Systems.

            The extended corporate structure
reflects the energy world’s latter-day complexities. You and your neighbors no
longer deal with the “friendly utility” but with “a super-regional energy
services and delivery company,” as Energy East bills itself.

            The changes are not mere
formalities.

Recent news from Energy
East’s headquarters indicates what comes with “growth” and a switch from local
to remote control.

            In September 2001, Energy East
announced that federal regulators had okayed its merger with RGS Energy Group.
The deal was sealed in June 2002. So Energy East, which had previously acquired
the Ithaca-based New York State Electric and Gas, could now boast a service
area covering “half of Upstate New York.”

            Soon heads started rolling. Longtime
RG&E CEO Thomas S. Richards, who’d earned kudos for community engagement,
was replaced by current CEO Paul C. Wilkens. Then the company announced a
“voluntary early retirement program” as part of a “comprehensive integration
and efficiency initiative.” The euphemisms meant 190 jobs lost through
retirements, plus more to be “determined in the first quarter of 2003.” The
company also said it would close seven local walk-in customer service centers,
two in Rochester, the rest in smaller communities from Allegany County up to
Wayne County.

            The company also asked for
substantial electric and gas rate hikes: between six and seven percent for
each. The request was bolstered with the claim that RG&E rates had been
lowered or kept flat for several years. But the state Public Service Commission,
which must rule on any changes, saw things differently. Earlier this year, PSC
staff actually suggested that RG&E’s gas and electric rates should be cut.

            Doing this, said RG&E in
response, “would put the company in financial distress and necessitate
[further?] job reductions and office closings.” One big step toward breaking
the logjam came in mid-December, when an administrative law judge recommended
the company get no increase for
electricity and a bit more than three percent for gas. (The judge also said the
company would be able to boost monthly service charges on both commodities.)

            Again, it was only a recommendation.
And the matter won’t be settled until the PSC rules on the matter.

            “At this point, the goal is to have
[the case] done by March,” says Albany-based PSC spokesperson David Flanagan.
“The active parties still have time to file briefs.” The PSC, he adds, is
looking at all the angles. (On December 3, the PSC also ordered RG&E to
keep its walk-in customer service centers open, pending further investigation.)

            The bottom line: RG&E rates will
probably go up, but not by as much as the company would like. (An RG&E
spokesperson did not return calls for comment.)

Hold on.
Weren’t the
“efficiencies” supposed to bring ever-lower rates and better service?

            That was the PR promise, but market
forces can push in any direction. Look at the California energy meltdown.

            And even granting that rates have
sometimes been kept down or flat, why is RG&E now asking for increases well
above the rate of inflation? The ups and downs reflect shifts in fuel costs, of
course. But beyond this, is Bigger Energy treading the path of, say, Big
Pharma?

            The situation with RG&E “is the
exact opposite of what was supposed to happen under deregulation,” says Jason
Babbie, an energy specialist with the New York Public Interest Research Group.
“That’s the gamble you take when it’s a free market model. You lose the
predictability, because there are so many complicating factors. We have taken a
step backward.”

            What about the step the
administrative law judge just took? “He did the right thing,” says Babbie.
“Having consumers pay more will make it harder for them to heat their houses.”
(And that’s no small worry, with unemployment remaining high and household
budgets being pinched at the beginning of winter.)

            Babbie compares the energy industry
to telecommunications. “We broke the phone company up into the ‘Baby Bells,'”
he says, only to have them come together again in force. Is this analogous to
what’s happened with Energy East? Babbie connects the dots between RG&E and
NYSEG: “Now we’re seeing that what were two territories is now one huge one.”

            There’s another layer of integration
that Babbie feels is crucial to ratepayers — though it mostly escapes public
attention. It’s the “NYISO,” or New York Independent Systems Operator. In 1997,
after several years of deregulatory planning, NYISO took over from the New York
Power Pool. Both NYISO and the old Power Pool have had the same technical
purpose: to coordinate the flow of electricity through the state’s power grid.
But as with the individual utilities, the aim has changed a bit. NYISO is
committed, in its own words, “to administer an open, competitive, and
non-discriminatory wholesale market for electricity” statewide. And it’s run
not by regulators but by an “independent 10-member board.”

            How independent? “It’s like the fox
guarding the henhouse,” says Babbie. “The chunks or blocs of votes [on the
NYISO board] are with industry.”

            Indeed, most board members have
connections to utilities like Commonwealth Electric, Wisconsin Electric Power,
and the Tennessee Valley Authority; a few are from the world of high finance.
Peter A.A. Berle, a former commissioner of the state Department of
Environmental Conservation and CEO of the National Audubon Society, is an
exception.

Groups like
NYPIRG keep an eye on the halls of power. But in general, the free energy market has
given ordinary New York ratepayers fewer options.

            First, there’s the matter of
consumer choice.

            Since the advent of deregulation,
Rochesterians don’t have much to choose from in the way of providers. A page on
the RG&E website lists the “qualified electric energy service companies”
that customers can buy power from in RG&E’s service territory. It’s an
artifice: You can theoretically buy from any company based anywhere, but you
get the same old electrons out of your wall socket. In any case, just three
companies are on the Rochester list. One is Energetix, an “unregulated
subsidiary” of RGS Energy Group. The others are Energy Cooperative of New York
(Buffalo) and Select Energy of New York (Syracuse). However, Energy Coop and
Select are “not serving residential customers at this time,” according to the
webpage.

            Then there’s public participation:
how much say the consumer has in the decision-making process. The PSC does
represent the consumer, though its stated “vision” is now “to promote
competitive markets and streamline regulation” above all. And there’s the state
Attorney General’s Office and Consumer Protection Board, both of which, reports
the Democrat and Chronicle, oppose RG&E’s
rate-hike. But neither specializes in energy.

            What about the Citizens Utility
Board? Founded in 1991, the “CUB” was designed to engage ratepayers in issues
before the Public Service Commission. Unlike the agencies, the CUB was a
membership organization. But don’t bother trying to locate the organization
today as you confront RG&E. Yes, CUB contact information is posted on the
Public Service Commission website. But the phone number listed is dead.

            PSC spokesperson David Flanagan
confirmed the worst: The CUB has folded. Its life was short. Though it enrolled
20,000 members within a couple of years — or perhaps because of that success
— the CUB lost its state support. Specifically, says a memo from the New York
Public Interest Research Group, Governor Pataki defunded the group by failing
to extend an executive order handed down by his predecessor, Mario Cuomo.

            The Cuomo order allowed the CUB to
insert its membership outreach materials onto PSC mailings. Without this
arrangement or an alternative mechanism, the organization was reduced to a
shell, then disappeared.

Another matter is energy
conservation. And here, are state policies being reduced to a corporate Shell?

            All too soon — with war against
Iraq imminent, and disruption of oil supplies possible — the nation could
relive the 1970s’ embargo and conservation movement all over again. Will the
“free market” in energy be up to such a challenge? Will citizens have real
leverage with state and local energy policies? Right now, lawmakers and lobbyists
are struggling over Article X of the Public Service Law, which will expire
January 1. This law governs the siting of new power plants, an issue with huge
financial implications. But after January 1, who will set the agenda (and the
rates)? Environmental Advocates, an Albany-based watchdog group, favors new
siting legislation that would give local officials, residents, and community
groups a big say. Other interests want a “streamlined” process that will
dispense with such inconveniences.

            Rochester’s already hip-deep in a
related process, without realizing it. RG&E has applied to the federal
Nuclear Regulatory Commission to renew the Ginna nuclear plant’s operating
license. The Commission recently held a public meeting on the renewal
application in Webster (only one of the populated areas within Ginna’s
now-proverbial 10-mile radius) and a decision is expected in early 2005. The
company has assured the public that the plant, which came on-line in 1970, has
been and will be safe. Even in its salad days, though, Ginna had troubles: In
1982, an accident released radioactivity to the atmosphere. Later, the company
was forced to replace the plant’s much deteriorated steam generators.

            Beware, says the Washington-based
Public Citizen Critical Mass Energy and Environment Project. Renewing licenses
for old plants like Ginna is “a high-stakes gamble,” says an analysis prepared
by the group. “As nuclear reactors age, utilities will be forced to spend large
amounts of capital to repair or replace components such as steam generators and
core shrouds.”

            Power generators, says the analysis,
“do not want to make their investors swallow these costs.” That’s a neat
summation of the free-market model, in which the public often gets stuck with
the bill — either through unnecessary rate hikes or indirectly through
government bailouts. And it’s market forces that slam the door on drop-in
service centers and other opportunities for the consumer to plug in.

This article appears in Dec 18-24, 2002.