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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.