News10NBC Investigates: What would a public takeover of RG&E look like?

How has public takeover of utilities worked elsewhere?

How has public takeover of utilities worked elsewhere?

ROCHESTER, N.Y. — The push to consider a public takeover of RG&E is back on. Last week, a number of local community groups and labor unions held a rally, urging Monroe County leaders to vote to fund a study to see whether a public takeover would be possible, but the County Executive and the union that represents RG&E’s current workers remain strongly opposed.

The Rochester City Council previously agreed to set aside money to help fund a feasibility study, but the cash is contingent on Monroe County coming up with additional funding and leading the effort to commission the study — which it has not agreed to do.   

Among others, Metro Justice, United Auto Workers 1097 and the Federation of Social Workers are pushing County Executive Adam Bello and members of the county Legislature to reconsider their stance. 

On Thursday, News10NBC Investigative Reporter Jennifer Lewke spoke with Ted Kury, the Director of Energy Studies at the University of Florida Warrington College of Business’s Public Utility Research Center, about how takeovers work, when they’re beneficial to ratepayers and when they’re not. 

Recently, voters in the state of Maine rejected a referendum that was the nation’s first effort to replace all privately owned utilities with a statewide nonprofit option. The public entity would have been governed by a board of elected and appointed members. 

Ted Kury: “There were three consulting firms that produced studies on whether forming Pine Tree Power in Maine would result in benefits to customers.” 

Jennifer Lewke (News10NBC): “They all found different things, didn’t they?”

Ted Kury: “They did. One study said it was going to be a great benefit to the customers, another study said that it was going to cost customers and then a third study said well, it’s going to cost customers more in the beginning but in the long run, they’re going to get that money back. I think, ultimately, that’s why voters rejected it — primarily because of the uncertainty on how much it would actually cost.”

But takeovers have happened on a smaller scale, elsewhere. 

Jennifer Lewke: “Have you ever seen a situation where you can parse out just one part of the infrastructure in a county versus an entire service area?”

Ted Kury: “Yes, in fact, that’s what Winter Park did.”

In 2005, the City of Winter Park, Florida, with a population roughly 6½ times smaller than the City of Rochester, took control of its investor-owned utility.

Ted Kury: “The disadvantage of doing that was that then you incur separation costs, so the costs that are necessary to separate your system from the rest.”

Initial estimates in Winter Park put the value of the infrastructure needed at $16 million. The utility said it was worth $100 million. A federal arbitrator eventually settled on $42 million. In total, the city took out nearly $50 million in bonds. 

Jennifer Lewke: “While you’re not paying investors anymore, you are paying on the bonds that you had to take out in order to fund what you’re doing.”

Ted Kury: “Yeah, and there are other things. The investor-owned utility is paying property taxes to the city and the county, a municipal utility is not going to be paying those taxes.  Also, while they don’t pay a return to investors, they do make some sort of transfer to the government.  So, above and beyond the cost necessary to provide service, they’re making some sort of transfer to the city/county.  I think the latest number I saw from 2021 was on average municipal utilities return about 6% of revenues to the government that owns them.” 

Jennifer Lewke: “How long did it take for Winter Park takeover?”

Ted Kury:Changing ownership of a utility is really complicated. There are a lot of hurdles you have to get through, a lot of contracts that have to be addressed, a lot of obligations that have to be addressed. It can take years, seven, eight, nine years — even when the takeover is uncontested.”

Jennifer Lewke: “Do you find that all of the employees stay and they work for the city or the county or do they (investor-owned utility) move their employees elsewhere and then you’ve got to find all these lineman and customer service reps and all that?”

Ted Kury: “I think that was another factor in Maine, there was a lot of uncertainty as to what would happen to the employees.  It typically depends on the size of the area, the size of the company.” 

Jennifer Lewke: “Over the long-term has municipal power been better for the customer?”

Ted Kury: “If there was one best model that worked for everybody, I think we would have found it by now.  The fact is, there is not one particular ownership model or organization model that is inherently better.  It all comes down to, for your community, what are the things that you value most, what is the system that gives you the things that you value that has the drawbacks that you can either mitigate in some other way or that you don’t really care about.”