Could Public Ownership Save the New York Power System?

New York’s profit-driven power system leads to higher costs, more blackouts, and more fossil fuels, activists say.

Ilana Cohen   ·   May 7, 2021
Con Ed plant on the East River at 15th Street in Manhattan, New York City. | Wikipedia Commons

Jon McFarlane didn’t focus on the loss of cable or even light when the power went out twice at his home in Queens Village, a majority Black neighborhood in Queens, between March and August last year. He had a more urgent priority: getting the ventilator that sustained his 87-year-old father, a recovering Covid-19 patient, back online. 

“That was a precarious situation, with the power going out,” said McFarlane, an activist with grassroots advocacy group VOCAL-NY. In that moment, he said, “you feel helpless; you feel marginalized. You feel like getting involved.”

His community has seen frequent blackouts in recent years, McFarlane continued. “The people in my neighborhood—when the power goes out, the last thing they worry about is cable or beautiful expensive lighting fixtures. They worry about the basic appliances running, like a fridge, the microwave, a ventilator,” he said. “I don't think that gets taken into account when prioritizing who gets power restored first.”

But those priorities could change, McFarlane said, if the state’s energy system is put under New Yorkers’ direct control. McFarlane is part of a movement of labor and climate activists fighting for democratic ownership of the state’s utilities as part of the Public Power NY Coalition. These activists cite a track record of controversial rate hikes and prolonged power outages as evidence of profit-seeking private utilities’ failure to provide affordable and reliable energy.

Now, they want to replace what they consider an obsolete, unnecessarily expensive system that runs largely on fossil fuel infrastructure at a time when the state is already lagging behind on its climate commitments. Under the Climate Leadership and Community Protection Act (CLCPA), New York has a mandate to decarbonize the grid by 2040. Achieving that goal will require transforming how the state sources its electricity, a mere 29% of which currently comes from renewables.

Activists and researchers are proposing public power as a solution to two related problems: sustainability and affordability. The public power campaign is backing two bills—one of which Assemblymember Robert Carroll introduced last month in the legislature—which they say would make New York’s energy mix greener and cheaper. 

They ground their case in the success of public power models nation- and worldwide, along with the failure of investor-owned utilities to prepare for extreme weather, most recently evidenced during February’s deep freeze in Texas.

Some energy experts are skeptical that putting the grid entirely under public control will help expedite the clean energy transition. Basic questions, such as who would bear the costs of public ownership, have been difficult for activists to answer because of limited comparable precedents at the scale and complexity of New York. And financing concerns are just one of the hurdles activists will have to overcome to see their full proposal through: private utilities hold entrenched power due to decades of concentrated lobbying and their substantial contribution to New York’s tax base.

Unpacking Public Power

Over 2,000 public power utilities already exist in the United States, together serving one in seven Americans and generating 10% of the nation’s electricity.

The first obligation of investor-owned utilities is to return revenue to shareholders. Publicly owned utilities, by contrast, operate as nonprofits. Their mandate is to serve the public, delivering power affordably, reliably, and sustainably.

Nationwide, customers of public electric utilities pay less and lose power less often than consumers of private ones. That affordability stems in part from the fact that, as nonprofit organizations, publicly owned utilities do not set rates to maximize shareholder profit and can be exempt from federal income tax.

Exorbitant salaries for the state’s private utility executives partly explain why public power is generally cheaper for consumers, according to Richard Berkley, executive director of the Public Utility Law Project of New York, a non-profit law firm which represents low-income and rural consumers of energy, water, and telecommunications services.

CEO compensation at the 19 largest investor-owned utilities in the nation totaled over $764 million between 2017 and 2019, according to the Energy and Policy Institute. As of 2018, the salary of ConEd CEO John McAvoy was nearly 45 times greater than that of the highest reported pay of a NYPA employee.

State Senator Jabari Brisport, center left, looks on as Public Advocate Jumaane Williams leads a chant. Photo: Public Power NY

Cheaper power doesn’t always mean cleaner power. Nebraska, the only state served entirely by a consumer-owned power system, has among the lowest energy costs in the nation—but sources over half of its energy from coal.

Still, activists have reason to believe public ownership will green the grid while bringing down electricity costs. On average, public power utilities generate more energy from renewable sources (40%) compared to the electric sector as a whole (17%), and have historically outpaced the electric sector in reducing carbon dioxide emissions. 

Because of the pressure private utility companies face to protect profits earned from supplying fossil fuel power, activists say they are a major obstacle to a clean energy transition. In 2019, for instance, Con Edison and National Grid threatened to limit new service in New York City if a proposed fracked gas pipeline project was not built. (After the project permit was denied, National Grid imposed a moratorium on new customers—then lifted it when Governor Cuomo threatened to revoke their license.)

“We've seen that private utilities have worked…[against] the transition to the Green New Deal renewable future that we need and instead, are holding us back,” said Aaron Eisenberg, an organizer with the Ecosocialist Working Group of the NYC Democratic Socialists of America. “So, it is incredibly important for us to have an 100% renewable, democratically controlled energy system. And the way we see this being most achievable in New York Statemeeting the scale of the challenge and in the timeframe necessaryis through a publicly-controlled system.”  

A Two-Pronged Proposal

To simultaneously decarbonize and democratize the power system in New York, public power proponents are advancing a two-part proposal to transfer full control of the state’s power system to lawmakers and residents.

Last month, Carroll introduced the first part, the New York State Build Public Renewables Act, in the Assembly, where it is co-sponsored by thirty eight other legislators.

The law would empower the New York Power Authority (NYPA) to build out utility-scale renewable energy generation and transmission infrastructure, while requiring it to supply only clean energy to customers. NYPA, the largest state public power utility in the nation, currently owns and operates one-third of New York’s high voltage power lines. As the state-owned backbone of New York’s electric grid, it is the ideal public agency to steer renewable energy generation and supply, activists say.

The law would also forbid NYPA from enacting utility shutoffs, form community energy hubs to foster public engagement with the power system, and mandate that NYPA release a decade-long climate and resiliency plan accounting for how it would comply with the CLCPA. 

The second prong of the public power proposal is the Utility Democracy Act (UDA), which is currently being drafted and is expected to be introduced later this year—and would result in the wholesale elimination of the for-profit energy suppliers that currently dominate energy distribution in New York.

Today, six investor-owned utilities and one large municipal utility, the Long Island Power Authority, operate as effective monopolies over defined service areas under the oversight of the state’s Public Service Commission, a governor-appointed board which regulates utility rates.   (New Yorkers do technically have an alternative to these utilities in the form of third-party Energy Service Companies, or ESCOs, which deliver electricity bought on wholesale competitive electric markets, but have a documented history of overcharging customers and targeting low-income residents. The Build Public Renewables Act would ban for-profit supply side ESCOs.)

The UDA would transition the state’s distribution utilities into public ownership within two years. That process would begin with the state acquiring all assets of the state’s private energy and gas utilities, either through purchase or by use of eminent domain—its right to expropriate private property for public use, with financial compensation to the property owners.

Once fully under public control, utilities would operate in redefined service areas, which activists say would be created with an eye toward environmental justice, equity, and energy democracy. They would be overseen by democratically elected boards consisting of public representatives, workers, community organizations, and energy experts. The UDA would also require the state to set a timeline for scaling down all gas infrastructure while scaling up renewable infrastructure to meet the resulting demand. 

Under this system, “the people who are impacted by decisions in the energy arena are the ones making those decisions and in charge of structuring what our electricity system looks like,” said Patrick Robbins, a coordinator at the New York Energy Democracy Alliance.

That would mean a shift of decision-making power toward the communities of color and low-income communities disproportionately burdened by power outages, utility bills, and the climate crisis, he said.

While the logistics of implementation are knotty, activists maintain that the broader vision advanced by the two-part proposal is straightforward. “A lot of people hear public power, they think it’s going to be a complex labyrinth of different agendas, goals and aims,” McFarlane said.

“It’s going to be a simple strategy: giving the power back to the people so that we can regulate our own resources.”

An Uncertain Path Ahead

Not everyone agrees with public power proponents that decarbonizing New York’s grid system should be coupled with changing its model of ownership, or that the seismic change in systemic control activists propose is feasible.

Berkley blamed the power system’s unaffordability, unreliability, and carbon intensity on a lack of proper incentives rather than the presence of a profit motive. “It’s not the ownership model that created the climate crisis,” he said. “I don’t think there’s a great deal of difference between capitalist privately owned utilities and publicly owned ones so long as you tell them what to do.” 

James Gallagher, an energy professor at Clarkson University and New York City’s former Director of Energy Policy, expressed concerns about the financial costs of transitioning to public power. He argued that the proposal leaves unclear who would take on these companies’ substantial debts; risks saddling taxpayers with additional costs by barring utility shut-offs and forgiving electricity debt; and would result in the loss of a substantial tax base. (Con Edison, for instance, ranks among the city and state’s largest taxpayers.)

Robbins said the amount the public would pay to acquire private utilities’ assets was a political question. Lawmakers should make an offer that factors in the costs of investor-owned utilities that consumers have long borne, overpaying for an unreliable and unsustainable system and its legally guaranteed private profits, he argued: “The public has been making down payments on those assets for years. An honest and transparent process would account for that.”

If utility companies reject the state’s offer, the state could seize their assets through eminent domain. That would likely lead to court proceedings, but activists say there is a strong legal case to make for limited public expenditure on the takeover. Robbins suggested that utility companies overestimate the value of their assets, especially fossil fuel infrastructure that will soon have to be shut down under the state’s emissions reductions law. (Some researchers argue that global fossil fuel assets may be over-valued by as much as $1 trillion.)

Asked for comment on the push for public power, Con Edison spokeswoman Anne Marie Corbalis said, “We work regularly and collaboratively with elected officials and their staff and respect the authority of policy makers to discuss laws and regulations that they think are in the best interest of the public.”

As proponents of statewide public power ramp up their organizing in the coming months, they may also benefit from and help escalate more local pushes for public power. Calls to municipalize New York City’s electricity grid, for instance, have gained the support of prominent elected officials, including Public Advocate Jumaane Williams. And last month, fourteen state lawmakers wrote a letter to Governor Cuomo calling to terminate the service contract of PSEG Long Island, a privately owned company, and make the Long Island Power Authority fully public. If fruitful, their effort could provide a bellwether for the state’s public power movement.

In McFarlane’s view, the traction the public power campaign has already gained—including the backing of state lawmakers—itself signals progress. “10 years ago, we’d never be able to do that,” he said.

“Now’s the time for people to say we’re not going to live under the cloud of these wealthy investors.”

This article was co-published with Climate Tracker. A shorter version of the piece can be found on Climate Tracker’s website here.

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