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Energy Committee Newsletter, February 22, 2001

ENERGY EAST - ROCHESTER GAS & ELECTRIC MERGER

On February 20th Energy East (the parent company of New York State Electric and Gas) and RGS Energy Group (the parent of Rochester Gas and Electric) announced a $1.4 billion merger agreement. Both boards unanimously approved the plan. Approval of the shareholders of both companies is needed for the merger. Approval by the New York State Public Service Commission is anticipated within the next 12 months.

The merger will create a combined natural gas and electricity service territory with nearly 3 million customers covering half of upstate New York.

Under the terms of the merger, RGS Energy will become a wholly owned subsidiary of Energy East. The headquarters of RGS Energy, RG & E, and NYSEG will be in Rochester. Operating headquarters for NYSEG will remain in Binghamton.

ENERGY PANEL EMPHASIZES NEW YORK'S NEED TO SITE MORE POWER PLANTS

To avoid the kind of energy crisis afflicting California, New York must site more power plants and do so quickly, a range of experts on energy policy agreed in a seminar on energy issues held on February 5th.

The discussion was part of a breakfast seminar series sponsored by the Government Law Center of Albany Law School. The participants in the one-hour discussion were: Daniel B. Walsh, president and CEO of The Business Council of New York State, Inc.; Barbara S. Brenner, a lawyer specializing in energy issues and a partner in Couch White LLP; Maureen Helmer, chairman of the New York State Public Service Commission (PSC); Gerald Norlander, executive director of the Public Utility Law Project (PULP); and Howard Shapiro, president of the Energy Association of New York State.

The key issues discussed included:

Siting more power plants, faster: Most speakers emphasized that New York needs to site more power plants, and to expedite the process by which plants are approved. Helmer said the need for more plants is the main lesson New York should take from California's current energy woes. She noted that the state Department of Environmental Conservation (DEC) and the state Public Service Commission (PSC) are both working "hard and fast to get [power plant applications] out the door." Both PSC and DEC play key roles in the plant-siting decision process spelled out in Article 10 of the state's Public Service Law.

How power powers growth: Several speakers cited the link between adding new power plants and future economic growth. We want new businesses to locate in New York, Brenner said, and New York won't be able to do that without an adequate supply of power. "Even the perception of future power shortages is eroding California's business climate," she noted. Brenner, Walsh, and Shapiro all noted that companies that apply for power plants in New York typically apply at the same time for plants in other states and countries. The first state or country that sites a plant for this applicant is likeliest to get it; slower government bureaucracies may lose out entirely, they said.

Increasing supply to reduce prices: Several speakers emphasized that New York needs more energy capacity to drive prices down and help competitive energy markets work.

Walsh noted that California, which has not sited a new power plant during many years of booming growth, is embroiled in a crisis rooted in an inadequate supply of power. The state has already spent $400 million to date to buy needed energy, with virtually no chance of recovering that money.

Deregulation: Several speakers said New York's energy concerns have nothing to do with its decision to deregulate or the manner in which it is regulating. Only Norlander dissented.

"Higher rates and higher prices are a convenient excuse for people who don't want deregulation or want to change the way it's done," Brenner said.

She noted that the New York City consumers would have paid for last summer's spike in energy prices even if New York hadn't begun deregulating. She said New York's key issues are related to the spike in the price of natural gas, which fuels most electricity generating plants in New York.

The need for cooperation among interested parties: Walsh criticized environmental groups that have been vocally opposing any and all power-plant sitings. He noted, for example, that the New York Public Interest Research Group (NYPIRG) had filed suit this week to block the siting of temporary power plants in New York City that are considered essential to meeting that region's needs this summer.

GOVERNOR NAMES OGS COMMISSIONER SEYMOUR TO NYPA BOARD

The New York Power Authority board, down to four board members with the retirement of "Rapp" Rappleyea, will see the addition of the Office of General Services Commissioner Joseph Seymour. NYPA trustees are appointed by the governor with the advice and consent of the senate. The trustees elect one of their number to serve as the chair. In his press release announcing the appointment, the Governor expressed interest in having Seymour appointed Chair of the Authority.

NYSERDA RELEASES SBC PROPOSED OPERATING PLAN

On February 15th the New York State Energy Research Development Authority (NYSERDA) released its Proposed Operating Plan for New York Energy $mart Programs (2001-2006). The report outlines the objectives of the program, the uses of the funds raised under the second phase of the Systems Benefits Charge (SBC), and the process of evaluation for the program.

The report provides a background of the program, the Energy $mart goals, and breaks down the overall scope of the SBC funded programs into four categories, each containing several sub-sections.

NYPA's NEW YORK CITY GENERATORS SUBJECT OF LAWSUITS

During the first week in February, two lawsuits were filed in New York State Supreme Court arguing that the New York Power Authority should not be allowed to site 10 temporary generators in New York City. The plants are scheduled to be in operation by the summer.

One lawsuit was filed by a movie company in order to block the siting near its Queens studio location.

The second lawsuit was filed by a coalition of 11 groups represented by the New York Lawyers for the Public Interest and the New York Public Interest Research Group (NYPIRG). The groups claim that the generators threaten neighborhoods and the city's environment.

The New York Power Authority, which is in the process of installing the generators, has done reviews showing that the plants will have no long-term impacts on neighborhoods nor will they harm air quality. The plants, which will add upwards of 400 MW, are being sited by NYPA in order to help avoid a shortage of electricity in the New York City load pocket. In a statement NYPA stated that a delay in siting the plants "will push New York City one day closer to California."

GROSS RECEIPTS TAX

At the last meeting of the Energy Committee we discussed the issue of expediting the phase out of the Gross Receipts Tax and the Natural Gas Import Privilege tax. In its letter to the Governor regarding 30 day amendments to the Executive Budget, The Business Council has suggested the inclusion of the GRT speed-up in the budget. Also, in The Business Council's testimony before the Assembly Ways & Means and Senate Finance Committees, the Council advocated for a "speed up reduction and repeal" of the tax. We also urged for the Legislature to enact Assemblyman's Faso's proposal (A.3113) to repeal the GRT entirely this year.