Syracuse street lights purchase

City doesn't need to purchase the street lights from National Grid; we already own them.

August 16, 2018

I am very much in favor of converting street lights to LED and creating a citywide communications network in the process.

However, the main (not only) issue I see regarding The LED Street Lights Project is the "purchase" of 17,507 city street lights from National Grid. As best as I can tell, the City is already the franchise owner, and so does not need to "purchase" any part of it. The original franchise contract from circa 1897 describes an agreement to build and operate ON BEHALF OF THE CITY an electric grid for a period of 15 years, the City having the option to take over operations any time after that. The company built and operated a system FOR the city (i.e., as a landscaping contractor that designed and maintains your yard, but doesn't own it). NatGrid is in fact a City contractor (franchise operator); the City is the franchise owner.

Moreover, the franchise operates on a cost plus guaranteed profit basis; it is a municipally granted monopoly; it is publicly regulated for prices and service; the electric grid exists on public property (and customer premises) and therefore constitutes a leasehold improvement on city property; financing during most or all of its existence has been facilitated via municipal revenue bonds; and, naturally, all the infrastructure has been paid for by customers (city residents) via their monthly bills, plus a profit to the operator. All these additional points further indicate that the City owns the franchise assets.

When National Grid "purchased" the franchise from Niagara Mohawk, it could legally only have purchased the operating rights. Effectively, it offered NiMo an incentive fee to transfer operations (and guaranteed profits) to NatGrid. There could not legally have been a franchise assets purchase---though over the decades utility companies have encouraged everyone to presume otherwise in such transactions and in regulatory negotiations and disputes. NatGrid grossly overpaid when it paid several billion dollars to "purchase" NiMo (or not, if the buyout debt was loaded onto the franchise and we've been paying it). Effectively, NiMo sold NatGrid the equivalent of the Brooklyn Bridge.

I'm not a lawyer. So the City Legal Dept. would have to review my claims. But on that basis, the City should not "purchase" the existing street lights. However, there may or may not be a legal path for the city to retake control of just a portion of the franchise. In which case, I suggest the City takeover the whole local franchise. Regardless of NatGrid's claimed costs and the PSC's feckless acceptance of them, it is demonstrable (comparing other utilities across the country) that the local utility can be operated at about 1/2 the current cost, which would save residents approximately $100 Million per year...after year...after year. The notorious ~5c/kW/h (30%) "surcharge" would disappear immediately; and Solvay shows us that we pay at least 3c/kW/hr (another 20%) too much in distribution costs.

More narrowly, there is also the simple question of the project's street lights valuation (claimed "net book value") of $850/light (~$15M total). These lights were surely depreciated decades ago, and maintenance costs are pay-as-you-go. So it's a dubious number (accounting can paint most any picture one likes). Moreover, if the cost of replacing the lights (plus the cost of buying the old ones) will save money immediately, then the current lights are clearly economically obsolete. Therefore, their market value is zero. NatGrid would replace them itself if it---rather than the City---was to receive the savings.

More broadly, if the new street lights are going to be "smart", it implies fiber optic (or WiFi or cellular) connections. Which implies effectively creating a broadband network throughout the city. $38 Million is roughly 3/4 of the way to a shiny new state-of-the-art community-owned fiber broadband utility service. At a minimum, we should combine the Street Lights Project with a Community-owned and operated Broadband Project.

Finally, at the project price of $38 million, nearly $2,200 per street light, the City could install standalone LED street light poles and bypass the "purchase" of the lights from NatGrid. This could be part of the first improvement for when the City boldly decides to takeover franchise operations, bury utility cables and eliminate utility poles while laying new fiber for a broadband and WiFi service and for other possible "smart city" initiatives (meter reading, environment sensing). Syracuse will gain fame as a "smart city" with excellent utility infrastructure and offering 1/2 priced power and 1/2 priced broadband service compared to most cities.

We should also discuss the benefits and preferences for different types of street light illumination: light only the road?; road and partially buildings?; intensity?; ambiance?

I urge the Mayor to make public the reports, details, and rationales of the project and for the City Council to withhold voting on the project until the public has had reasonable time review the information and offer comments. So far, detailed reports have been withheld from the public.