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ENERGY NEWSLETTER - APRIL 3, 2002

THE ISO ISSUES NEW ENERGY NEEDS REPORT
On March 27th the New York Independent System Operator (ISO), the entity charged with administering the state's wholesale electricity markets and high-voltage electric transmission system, released a comprehensive report on electricity needs entitled; Power Alert II: New York's Persisting Energy Crisis. The report states that New York needs to add 7,100 megawatts of capacity by 2005. The report reaffirms the conclusions that the ISO reported a year ago - New York must increase generating capacity in order to avoid serious shortages of electricity and economic damage.

The report said that New York should immediately approve 3,000 megawatts of new capacity and that Long Island alone needs between 750 and 1,000 megawatts to reduce "severe reliability risks and high prices." Of the 7,100 megawatts needed by 2005, the ISO claims that between 2,000-3,000 megawatts should be located in New York City, which, like Long Island, is a load pocket - a region whose energy needs cannot be satisfied by imported electricity due to limited transmission capabilities. So far New York State has seen the approval of seven cases under the Article X siting law capable of producing 4,430 megawatts of electricity. However, only one project is currently in the construction phase - the Athens project in Greene County (1080 MWs).

The ISO's conclusions echo those reached by The Business Council's research affiliate, The Public Policy Institute, in a February 2002 report entitled The Power to Grow. That report concluded that New York must still add 9,200 megawatts of new capacity by 2007 to avoid risk of serious economic damage. Both Power Alert II: New York's Persisting Energy Crisis and The Power to Grow debunk the claims by some that the destruction of the World Trade Center and an economic slow down last fall have eliminated long-term power needs.
The ISO also stated that power supplies could also be adversely impacted by one of the Northeast's worst droughts in decades. With water levels low, hydroelectric generation may be impacted as well as the water requirements for the cooling and pollution control needs of fossil-fuel generators. In addition, the ISO recommended the reauthorization of the Article X siting law and a commitment to fuel diversity. The ISO is currently in the process of compiling a natural gas infrastructure and supply study in conjunction with the New York State Energy Research and Development Authority (NYSERDA). At request of New York State, the ISO is also assessing and studying the state's transmission infrastructure. For more information access the ISO web page at: http://www.nyiso.com/index.html

STATE ENERGY PLAN (SEP)
On March 5th, The Business Council filed comments with the State Energy Planning Board at a public hearing in Albany. The Planning Board is comprised of the heads of the following five state Agencies; the New York State Energy Research and Development Authority (NYSERDA), Environmental Conservation, Transportation, Economic Development and Public Service. NYSERDA's President serves as the Chair of the Planning Board. The State Energy Planning Board finished its ninth and final hearing on March 5th.

The Business Council's comments were broken down into six key areas;

The points were reflective of the comments The Business Council filed last June with the State Planning Board (at the beginning of the process). The key area of concentration was the need for more electrical generation. The Business Council stated that the Plan needs to better forecast the need for more electricity and thus reflect a need for more generation and infrastructure. In this area we stated that the draft Plan offers a "mid-range forecast" for peak demand growth of 0.68% a year—and a "high-end forecast" of only 1.1% growth a year. Yet peak demand has grown an average of 2.1% over the past five years. It's grown 1.8% a year on average over the last 20 years—for total growth over that period of 43.1%. This unrealistically low forecast for peak demand leads the Plan to incorporate projections for increases in reserve margins that are overly optimistic. These low projections, in turn, point the Plan toward lower projected generation capacity than we believe is necessary for the state, and thus mask the very urgent need to bring new plants on line over the next five years. The Business Council submitted copies of its research report, "The Power to Grow", as part of its testimony. This report makes the case for siting at least 9,200 megawatts of electrical generation over the next five years.

In addition, we stated that the Plan needs to stress fuel diversity such as support for the State's coal and nuclear powered electricity generating facilities. Also of concern to The Business Council are the impacts of environmental initiatives and proposed regulations on the cost of energy. Additionally, the state needs to pursue changes in the Article X siting law to make the process faster. For a copy of The Business Council's Comments access:
www.bcnys.org/inside/energy/engyplan02.htm

ENERGY ASSOCIATION FORUM
An Energy Forum hosted by the Energy Association, held in Albany on March 20th stressed the need for New York State to build more plants and increase its supply of electricity. The eight member panel was comprised of The Business Council's Vice Chairman and KeySpan CEO Robert Catell, State Senate Energy Committee Chairman James Wright, Assembly Energy Committee Chairman Paul Tonko, the Independent System Operator's President Bill Museler, New York City Building Congress President Richard Anderson, Mirant New York President Mark Lynch, NYSERDA President Bill Flynn and the New York AFL-CIO President Denis Hughes. The panelists discussed the energy needs facing New York State and other issues such as the security and safety of New York's energy infrastructure. One point that was discussed at length was the misconception that New York is not in need of additional generation for the coming years due to the recession of last fall and the temporary loss in demand due to the destruction of the World Trade Center. Many of the panelists noted that even with slow economic growth, new power is needed to fuel New York's growing power needs. For example, the summer of 2001 serves as an indication of how tight the supply of electricity is in New York.

On August 9, 2001 New York State reached its all time peak demand of 30,983 MW. If new generation is not brought on line over the next several years, New York will be in danger of coming close to exceeding levels of demand in excess of reliability standards. Significant load pockets already exist in New York City and Long Island. The Business Council has been adamant in its support for new baseload generation and has published the figure of 9,200 MW as a target for new power over the next five years as means to insure reliability and lower costs.

COUNCIL SEEKS PARTY STATUS IN NEW CASES
The Business Council has applied for status as an "intervenor" in three (3) more power-plant application cases pending before the state Siting Board. The Council has filed for status in an application in the three most recent cases before the Siting Board. These case are Spagnoli Road Energy Center in Suffolk County, Glenville Energy Park in Schenectady County and Kings Park in Suffolk County.

The Business Council is seeking to join these proceedings to advance broad economic arguments about the need for adding electricity-generating capacity in New York State. Our goal is to ensure the continued reliability of New York's electricity system, and foster the competition needed to drive down New York's electricity costs.

The Business Council sought and received intervenor status in four (4) other cases over the past two years; Bethlehem, Brookhaven, Empire State Newsprint Project, and Wawayanda.

Since then, The Public Policy Institute, has published a report on the economic arguments on increasing capacity in New York, and submitted it as part of testimony in the Bethlehem case.

Article X of the state Public Service Law, which outlines how the state will approve or reject proposals to build new plants, allows interested parties to seek status as "intervenors."

Intervenors become official parties in the Article X hearing process, and can submit testimony, analysis, and research in support of, or in opposition to, the proposed plants.

MIRANT'S BOWLINE UNIT 3 RECEIVES ARTICLE X PERMIT
The New York State Board on Electric Generation and the Environment (Siting Board) approved, with conditions, the application of Mirant Bowline, LLC for a Certificate of Environmental Compatibility and Public Need to construct a 750 megawatt electric generating facility. The plant is to be located in the Town of Haverstraw, Rockland County. Mirant will construct the new plant on 25 acres adjacent to two (2) existing plants they currently operate at Bowline Point.

The approval of the Bowline project brings the total number of plants approved under the Article X siting law to seven - capable of producing 4,430 megawatts. However, only one project, located in Athens, has begun construction. So far 24 applications have been submitted to the siting board under Article X of the Public Service Law (1 has since been withdrawn).

UPDATE ON ARTICLE X PROJECTS
The permitting of Mirant's project brings the total number of plants permitted under the Article X process to seven (7). The other six (6) projects, and projects sponsors, that have received permits are:

For more information access the PSC web page. This web site provides a chart of all Article X projects and a case by case study of each project with links to the developer's home page.
http://www.dps.state.ny.us/articlex.htm

ARTICLE X BILLS INTRODUCED
There have been two (2) bills introduced in the Legislature addressing the reauthorization of the Article X power plant siting law. The Business Council has reviewed both of them. The first bill, S. 6230-A (Wright) / A. 9826 (Tonko) was submitted at the request of the Independent Power Producers of New York (IPPNY). The bill was reviewed at the February 25th meeting of The Business Council's Energy Committee. The bill address the problems in the current Article X law that have been raised by the generating community. The bill makes moderate changes to the Article X law. The Business Council is working on a memo in support of this bill. The second bill, A. 10362 (Tonko) makes wholesale changes to the Siting Law including lowering the threshold to 15 MW, increasing intervenor funding, and changing the makeup of the siting board. The Business Council will continue to monitor the process throughout the session and has had discussions with the staffs of both the Senate and Assembly Energy Committees and the Governor's staff on the renewal of the siting law.

NEW YORK INDEPENDENT SYSTEM OPERATOR NEWS
The New York Independent System Operator (NYISO) and the PJM, the entity responsible for the wholesale electricity markets in Pennsylvania, New Jersey, Maryland, Delaware, Virginia and the District of Columbia, have enacted an agreement to study interregional issues. The agreement, effective March 15, 2002, is designed to address "seams" issues between the two areas on an expedited basis. Seams issues occur when different rules between neighboring electric markets cause problems with interregional trading. Under the agreement, the two parties will each designate an Interregional Coordination Officer (ICO) who will be responsible for identifying seams and market inefficiency issues, and other market improvement opportunities. The ICOs will attempt to transform proposals based on their findings into solutions. The agreement also calls for quarterly reports on the work of the ICOs. These reports will be filed with the Federal Energy Regulatory Commission (FERC) and the respective states' public utility commissions.

POWER FOR JOBS UPDATE
Governor Pataki has introduced legislation to extend the Power for Jobs program for more than 300 participants in the second and third years of the program. Introduced by Senator Jim Wright, S. 6425, would make 183 MW of electric power available through the end of 2005. The bill also includes several changes to the general powers granted to the New York Power Authority, including provisions regarding the sale of electricity into the state's wholesale market, and provisions that broaden NYPA's ability to acquire and distribute power. The Business Council has been a strong advocate for extending the Power for Jobs program. We are still reviewing the Governor's proposal, and are seeking input from interested Business Council members.

For more information contact Ken Pokalsky of The Business Council's Manufacturing Council.

PUBLIC SERVICE COMMISSION
The Public Service Commission 2002 session schedule is as follows;

April 17
May 22
June 19
July 24
August 21
September 18
October 23
November 20
December 18

All meetings, except for May and December, will be held in Albany at 10:00 a.m. at the PSC conference room, 19th floor, Agency Building 3, Empire State Plaza. The May and December meetings will be held in New York City offices of the PSC at One Penn Plaza at 1:00 p.m.

The schedule can also be accessed on the PSC web site:
http://www.dps.state.ny.us/session.htm

More information on the PSC and its activities can be found on the PSC web page: http://www.dps.state.ny.us/index.html

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