Energy Committee Meeting March 29, 2004Staff Contact: Ken Pokalsky
Cindy Chadwick, Chair, New York State
Electric & Gas
Greg Ames Spectra Environmental Group, Inc.
Christine Benedict NYSERDA
Joseph H. Brendel Brendell & Associates, Inc.
Carolyn Brown IPPNY
Garry Brown NYISO
Patrick Brown Brown, Vidal & Weinraub
Bob Callender NYSERDA
Peter Clouse NYS Assembly, Ways & Means-Minority
Keith Corneau Empire State Development
Terri Crowley Hinman Straub
Patrick Curran The Energy Association of New York State
Gary Davidson NYS Department of Public Services
Mike DiBella Constellation New Energy
Gavin Donohue IPPNY
Nick DuBray The Business Council of NYS, Inc.
Johnny Evers The Business Council of New York State
Janis Fallon Whiteman Osterman & Hanna, LLP
Bill Flynn Niagara Mohawk Power Corporation
Sharon Foley The Energy Association of New York State
Andrew Gansberg Nixon Peabody, LLP
John Glusko CH Energy Group
Stephen Hanse The Energy Association of New York State
Maureen Helmer Couch White (IECC)
John Holsapple Environmental Energy Alliance of NY
Tom Kiley Northeast Gas Association
Len Kovalsky Super Power, Inc.
Kevin Lanahan Consolidated Edison Company of New York
Peter Lanahan Behan Communications, Inc.
Michael J. Madigan Barton & Loguidice, P.C.
Larry Malone Couch White (Mirant)
Valerie S. Milonovich NYSERDA
Carol Murphy New York Independent System Operator
Mike Nisengard Bogdan, Lasky & Kopley, LLC
John P. (Jack) Perkins Jaker, Inc. (ChevronTexaco)
Carol Philippi Devorsetz Law Firm
Ed Reinfurt The Business Council of NYS, Inc.
Chris Revere The Vandervort Group, LLC
Mike Rose National Fuel
Mike Rynasko The Energy Association of New York State
Michael Santarcangelo Empire State Development
Stuart Silbergleit The Energy Association of New York State
Howard Stanley Corning Incorporated
Ty Tafel Golub Corporation
John Tauzel New York Farm Bureau
Nancy Testani National Grid
Ken Theobalds Entergy Nuclear Northeast
Thomas Tranter Corning Incorporated
Jack Vandervort The Vandervort Group, LLC
Dan Whyte NEGT, Inc.
- Welcome and Introductions:
Johnny Evers, The Business Council A presentation from The Business to outgoing Energy Chairman, Michael Rose of National Fuel Gas was made by the staff. The incoming chair, Cindy Chadwick of New York State Electricity and Gas (NYSEG) was introduced.
- Guest Speaker:
Mr. Howard Tarler, Head of Bulk Transmission for The Department of Public Service. Mr. Tarler reviewed his preliminary report on the August 14, 2003 blackout.
On March 1st the Public Service Commission released its initial report on the August 14, 2003 blackout. It stated that New York State's power grid did not contribute to the August 2003 blackout. The report listed a number of recommendations based on the over 900 requests for information, interviews with regulators and utilities, and thousands of industry documents.
The report stated that although the power surges from the Midwest cascaded through New York and the surrounding region, there is no evidence of any significant failures in the operations of New York's electric system. The report supports earlier findings that there was no warning to New York utilities or the NYISO as to the magnitude of the problems originating in the Midwest that might have allowed New York's utilities and regulators to take actions to prevent or minimize the impact on New York's electric system.
Despite the impact of the blackout on New York State the report determined that, under the circumstances, electric, telecommunications, gas and water systems generally performed well. Total restoration was accomplished in 30 hours. The PSC stated that a number of recommendations should be implemented including national reliability standards. However, it should be noted that New York already operates under mandatory, and more stringent, reliability rules than those required by NERC and NPCC.
The state Public Service Commission will release a completed report on the blackout next month. A full copy of the initial report is available at
- Power for Jobs:
The committee discussed Power for Jobs. Both houses and the Governor have discussed having the program continued. It is in the Governor’s proposed budget at a funding level of $10 million through a voluntary appropriation from the New York Power Authority (NYPA). Both houses have expressed support for a continuation of the program. Remaining funding under the gross receipts tax (GRT) which is being phased out, is 2% of residential on the TTD portion. The staff of The Council has expressed strong support for extending this year’s contracts as well as the contract that will expire in the next two years.
- The Renewable Portfolio
Standard (RPS) was discussed.
The issue of cost needs to be thoroughly addressed in the context of the reliability reports. Similarly, the NYISO and NYSRC should be given an opportunity to insure that an RPS would not adversely impact the reliability of the system.
In order to reach a level that satisfies the 25% goal, the studies in the case provide scenarios that "ramp up" the addition of renewable sources from 2006 until 2013, adding generation funded through charges assessed on ratepayers per kilowatt hour and the implementation of a specific renewables charge ("SBC-like") to encourage certain renewable generation technologies.
Cost remains a key factor in any RPS adopted by the Commission. The Business Council suggests that any RPS not adversely impact rate payers or run the risk of repeating the energy procurement problems inherent in past mandatory systems.
We continue to advocate for a voluntary approach and/or a graduated process that avoids significant rate impacts on New York’s commercial and industrial energy consumers. The commission should be given a variety of options in order to avoid costly impacts on rates and adverse economic impacts on market participants. And, as we have stated in earlier comments, the options should not be limited to achievement by 2013 but rather given the necessary time to mature ("whether 2013, 2023 or some other year").
The interconnected nature of cost and reliability merits further study on the impacts that these two areas have on one another. System reliability and the funding mechanisms detailed in Cost Study Report II are intertwined and need further study. Although part of a separate study, the Phase 2 reliability report needs to be completed in order to show the true cost impacts of an RPS.
Cost Study Report II, Volume A details a system under which the DPS attempts to achieve a 25% level of renewable generation in New York State by 2013. It is now estimated by the DPS staff that the current level of renewables is 20% and an additional level of 5% [renewables] would be required if it is to reach a 25% target.
In the summary of results in Volume A, the report states that on table 5C-3, Cumulative Cost Premiums to Achieve the RPS - Cost Based Approach (2003$), that total cost to achieve an RPS is $876,787,514. Correspondingly, Table 5C-4, Cumulative Cost Premiums to Achieve the RPS - Market Clearing Approach (2003$) projects costs at a level of $1,082,188,203. Both figures include a Main tier and SBC-like tier. These figure exhibit the potential costs associated with the achievement of an RPS by 2013.
The report makes the general statement that cost fluctuations are "slight", especially when taken in the "context of the high volatility in energy in recent commodity prices in recent years". The potential to increase electricity bills in an environment demanding lower costs seems unnecessarily risky, especially since so many factors driving the study’s cost analysis are speculative (i.e. fuel costs, retirements of existing generation, location and output of renewables coming on-line, inflationary impacts, status of the federal PTC, market economics, etc.). This leads us to believe that the factors guiding cost are open to fluctuation.
The Business Council is concerned that the implementation of an RPS under many of the scenarios presented in the cost studies may in fact be projected as lower than are the actual cost to implement them. The cost to uplift a renewable system and the creation of a per kilowatt hour charge used to subsidize the building of renewables, would have a universal impact on all rate payers. But, it would naturally have a large impact on those who consume the most – business and industry.
The staff of The Business Council stated that comments along these lines will be drafted and submitted to the ALJ by April 8. (Comments were filed).
The Recommended Decision is expected in early May 2004.
- Legislative Update:
The following bills were discussed by the committee.
- Creosote Ban - A. 5930-B (Brodsky) / S. 4975-A (Marcellino)
X :A.6248-B (Tonko) / S. 4074 (Parker)
- Article 7 - S. 5728 (Wright)
- Light Pollution - A. 6950-C (Grannis) / S.3003-C (Marcellino)
- Public Security - A.9718 (Gianaris) / S. 6120 (Padavan)
- Net Metering - A. 8429-B (Englebright) / S. 4890-B (Wright)
- Pilot Light Bill - A. 2546 (Tonko) / S.2301 (DeFrancisco)
- Four Pollutants - A.5933-A (Brodsky)
- Petroleum Retail Divorcement - A.8589-A (Abbate) / S.4428-B (LaValle)
- Infrastructure Bill - A. 4297-B (Tonko) / S. 4064-B (Velella)
- Call-Center Bill - A.201 (Cahill) / S. 6079 (Velella)
- LNG - A. 8852-A (Tonko) / S. 885-A (Marcellino)
- C02 Emissions - A. 10049 (DiNapoli)
- Radiological Preparedness Costs - A. 1829 (Galef)
- Adjournment and closing
Chairperson Chadwick thanked the members for attending the meeting and stated that the next meeting will take place some time in June depending on the session and schedules.
At the Board meeting of May 10th, the issue of Article X will be discussed by the board of directors. Staff has prepared a resolution which outlines the background of the issue and the need for a re-authorization of the Article X Siting Law.
The draft (subject to change) is as follows:
Background: The Business Council has urged the legislature to re-authorize the Article X power plant siting law as part of our overall advocacy effort in support of affordable, reliable electric power. Article X provided "one stop shopping" for necessary approvals of major power projects, and established a one-year timetable for project reviews. Unfortunately, despite an improving track record for timely review and approval of projects, the siting law expired on December 31, 2002.
The Business Council has documented the state's need for increased generating capacity in order to keep pace with growing demand, and to assure system reliability and retail rate competitions. Estimates by the Public Policy Institute in its January 2002 report, The Power to Grow, show that New York needs to add at least 9,200 megawatts by 2007.
The state's failure to reauthorize the law sends the wrong message to both the investment community, which may be seeking to build and invest in base load generation capacity, as well as to the state's business sector, which is dependent upon affordable electric power for its success. Further, as New York continues to debate the reauthorization of its siting law, significant opportunities may be lost to commence construction on new power plants that, by their very nature, require several years lead-in time to plan, finance and construct. As our demand for electricity continues to grow, with limited growth in our capacity to generate and transport power, we are fostering a situation that could lead to increased costs, blackouts and brownouts, and costly interruptions to business activity.
Reliable, affordable electric power is essential to assure an attractive business climate in New York. A renewed Article X process, with streamlined procedures and other updates, is an important tool in assuring the timely development of necessary, additional generating capacity.
Resolved, that the Board of Directors adopt this resolution calling upon the State Legislature and the Governor to re-authorize Article X of the Public Service Law as a essential step in fostering a regulatory atmosphere conducive to siting the base load generation required to guarantee adequate supply, reliability, competition, and a healthy business climate.