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ENERGY COMMITTEE NEWSLETTER
March 29, 2001

  

NEW YORK ISO UNVEILS EMERGENCY DEMAND RESPONSE PROGRAMS

The New York Independent System Operator has recently unveiled its Emergency Demand Response Program (EDRP) designed to help participating customers reduce grid demand when electric-capacity constraints could threaten electric service in the state. The EDRP is a voluntary program. It offers financial incentives to participants who lower electricity usage during targeted times of electric-capacity constraints.

The EDRP begins May 1, 2001 and runs through October 31, 2002. The program was highlighted at the ISO's conference "Price-Responsive Load
Management: A New Opportunity in New York State" in Albany on March 22-23.

The EDRP program, as well as a Zonal Price Capped Load program and an Incentivized Day-Ahead program are designed to create a portfolio for demand response and demand reductions for the summer of 2001. They were created in response to New York's tightening electricity market and are designed to have end use customers paid for energy they don't consume from the grid.

The Public Service Commission has also been studying this issue under Case 00-E-2054. They have been working in conjunction with the ISO and the utilities to match their efforts with the NYISO programs. Their updates can be found on the PSC website at: http://www.dps.state.ny.us/udrp.html.

In addition to the implementation of this new program, the ISO is working in conjunction with the New York State Energy Research and Development Authority (NYSERDA) through its Peak Load Reduction Program (PON 577-00). Information for this NYSERDA program and a similar one for Distributed Generation Technologies and Combined Heat and Power (PON 536-01) could be of interest to Business Council members, especially large commercials and manufacturers, who are researching various types of generation and electricity consumption solutions/alternatives.

NEW YORK ISO NEWS
Northeast Regional Electricity Markets Move Closer

On March 29th the New England Independent System Operator (ISO-NE) and PJM Interconnection, LLC (the Independent System Operator for parts or all of Pennsylvania, New Jersey, Maryland, Delaware, Virginia, and the District of Columbia) announced their intention to formalize an agreement to standardize their electricity markets by agreeing to universalize certain aspects of their wholesale market operations. The ISO-NE and PJM are responsible for the maintenance of their respective wholesale electricity markets and the reliability of the transmission grids in their territories.

In a report delivered to the Federal Energy Regulatory Commission (FERC) on March 29th the ISO-NE outlined its proposed comprehensive wholesale market program. The program combines certain features of its own system with those of PJM’s. The amalgamation will create a standardized wholesale market structure entitled the Standard Market Design. The system is being developed with the aid of the ALSTROM ESCA Corporation, a systems developer for electric utilities. Together with the two ISOs, the developer will create, through software exchanges and the mutual sharing of practices, a standardized market design.

The two ISOs (PJM and New England) operate the wholesale electricity markets to the east and south of the New York Independent System Operator (NYISO). The coordinated effort by PJM and ISO-NE represent a great step towards the elimination of trading barriers across the markets and promotes the FERC’s goal of creating a seamless electrical marketplace. Earlier in the year, the New York Independent System Operator (NYISO) and the ISO-NE issued a joint resolution establishing a task force on inter-control area market coordination to enhance interregional coordination and reduce barriers to transactions between the two wholesale electricity markets. That resolution was passed on January 16, 2001 when both bodies made their Regional Transmission Organization (RTO) filings with the FERC. The RTO is designed to achieve a conformed market across the northeastern control area.

The conformity in standards brings the four regional wholesale electricity markets (New York, New England, PJM, and Ontario (Independent Market Operator)) closer together in the development of a seamless regional electricity market. In a statement issued on the same day (March 29th), NYISO President/CEO lauded the steps taken by the ISO-NE and PJM stating that this will further the goal of a “virtual regional transmission organization”. To get the press releases (PJM/ISO-NE and NYISO) visit http://www.iso-ne.com/iso_news/newnews.html and here

Also, the NYISO has announced the addition of Steve Sullivan, formerly the Deputy Director of the Independent Power Producers of New York, to the post of Director of Communications.

NYPA NEW YORK CITY GENERATORS

On Thursday, March 22, the Assembly committees on
Environmental Conservation; Energy; and Corporations, Authorities
and Commissions held a joint hearing on the eleven (11) NYPA generators being installed in New York City and Long Island. Testifying at the Assembly hearing were Eugene Zeltman,
President of the NY Power Authority, Maureen O. Helmer, chairman of the state Public Service Commission, and Glen Bruening, executive deputy commissioner of the state Department of Environmental Conservation.

NYPA plans to install 10 of the generators at six sites in New York City and an eleventh on Long Island. NYPA's Eugene Zeltman stated that the plants are needed to help avoid possible electricity shortages in New York City and Long Island this summer. The gas-turbine generators will be the cleanest sources in the city according to NYPA. Additionally, NYPA will invest an additional $50
million for "the express purpose of providing the most advanced available equipment to control air emissions and noise."

Public Service Commission chair Maureen Helmer, testified on the issue as well. She stated that the current conditions in New York
necessitate the addition of the approximately 400 megawatts that the turbines will provide. The plants were granted three year permits by the state's Department of Environmental Conservation.

The Assembly hearing centered on the environmental impact of the
plants, their locations, and the belief by some members of the Assembly that there is not the dire need for the plants. Also, some Assembly committee members raised concerns over the possibility of having the plants for longer than three years or having them sold.

NYPA maintains that these plants are a stop gap measure to maintain electrical reliability over the next few years. In addition,
the plants will emit 400 times less nitrogen oxides, 140 times less particulates and 30 times less sulfur dioxide than many existing facilities with similar generating capacity. The equipment to be installed by NYPA will also reduce carbon monoxide emissions by 75 percent. In addition to installing the new generators, NYPA will continue to expand its energy efficiency programs in New York City.

The Business Council has been in support of the addition of the power plants in order to maintain electricity reliability in New York City and Long Island. NYPA has also been the subject of a lawsuit over some of the locations of the generators. The generators are hoped to be in operation by June 1st. The initial cost was $510 million.

ENERGY ASSOCIATION PANEL “POWERING NEW YORK’S FUTURE”

What New York's energy market needs most is more power plants and a faster process for siting them, a panel of top economists, utility executives, and industry and labor leaders concluded in a panel discussion on March 21st in the State Education Building’s Chancellors Hall.

During the discussion, a consensus also emerged about what New York's energy markets need least: new legislative intrusion into energy markets to legislate prices, redo deregulation, or re-regulate energy.

The main issues in the two-hour discussion were laid out in an opening speech by Alfred E. Kahn, former chairman of the New York State Public Service Commission (PSC) and an internationally recognized expert in deregulation. Now a professor emeritus at Cornell University, Kahn oversaw the successful deregulation of the U.S. airline industry as chairman of the Civil Aeronautics Board in the 1970s. He is the author of several books, including The Economics of Regulation, which is considered an authoritative
work on deregulation.

Overall the main points were:

New York's energy policies should reflect a commitment to "fuel diversity," said William Allyn, chairman and CEO of Welch Allyn Ventures and chairman of The Business Council. Panelists noted that making all new energy plants natural gas-fueled plants will put a strain on natural gas supplies
throughout the northeastern United States, and will also strain the natural gas transmission infrastructure within New York. Other technologies, including clean-coal technology, must be considered.

New York also needs to address concerns about energy transmission, both of natural gas and of electricity, especially electricity generated in the western part of the state and slated for delivery downstate.

A report released last week on New York's energy needs by the New York State Independent System Operator (ISO) outlines a good target for New York's need for new energy: the addition of 8,600 megawatts in new power by 2005. Carol Murphy of the ISO, citing the ISO study, noted that demand in New York rose 2,700 megawatts from 1995 to 2000, but capacity increased only 1,060 megawatts during that period.

A key obstacle to addressing energy needs generally and increasing capacity in particular, is generating the political will to make it happen. A broad range of economists and leaders of industry, utilities, and labor will need to collaborate to create that will, said Denis Hughes, president of the New York State AFL-CIO.

Besides Kahn, Allyn, Murphy, and Hughes, participants in the discussion included: Eugene McGrath, chairman, president, and CEO of Consolidated Edison, Inc., and a member of The Business Council's board of directors; Steven M. Fetter, managing director of the Global Power Group within Fitch, an international rating agency; Richard Anderson, president of the New York Building Congress; and William T. Orr, senior vice president of Mirant Americas, a global energy company. The discussion was moderated by Ed Dague, managing editor and anchor of WNYT-TV in Albany. The panel discussion was sponsored by the Energy Association of New York State.

ENERGY ISSUES IN SENATE AND ASSEMBLY BUDGETS

The state Senate and Assembly both released their budget proposals last week. Of interest in the Energy area are the following proposals;

The Senate has included most of the tax cuts in the energy field it revealed earlier in Senate bill #2, including a gradual repeal of gross receipts tax for residentials. (When the GRT phase out was enacted in law last year a portion of the tax was left for residential customers - this is the portion the Senate is suggesting gets cut). The senate also put forth an energy efficiency exemption, a home energy assistance credit and the elimination of the petroleum business tax on commercial heating oil. The speed of the repeal of the GRT was not included.

The Assembly, proposed a gross receipts cut for residentials, similar to the Senate. They have not offered the speed up repeal as suggested by the Schimminger bill (A.7330 ) or Faso bill (A. 3113).

The Assembly is also advocating the establishment of an Office of State Energy Solutions with the moneys collected through the Systems Benefits Charge - a clear duplication of an existing state authority already charged with administering the SBC funding and programs (NYSERDA).

PUBLIC SERVICE COMMISSION

The Public Service Commission (PSC) met in Albany on March 28th.

The commission approved the following items of note:

It enacted initial programs to reduce demand for electricity during peak periods and improve overall reliability of the grid in New York City. The commission acted on plans by Consolidated Edison to implement “demand response” programs this summer. The commission also directed all of the state’s investor-owned utilities to submit plans to implement customer-incentive programs to reduce peak demand. More on these plans can be obtained by seeing the web sites listed after the ISO article (above) on Emergency Demand Response Programs.