ENERGY NEWS, December 4, 2001

The Business Council has applied for status as an "intervenor" in two more power-plant application cases pending before the state Siting Board. The Council has filed for status in an application by Wawayanda Energy Center to site a 540-megawatt natural gas-fired plant in Orange County, and in an application by Astoria Generating Company to site a 1,842-megawatt natural gas-fired plant in Queens.

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.

Earlier this year, The Business Council sought and received intervenor status in two other cases: Brookhaven Energy's proposal for a 580-megawatt plant in Suffolk County, and PSEG Power New York's proposal for a 750-megawatt plant in Bethlehem. 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.

The Public Service Commission (PSC), at their November 28th meeting, approved the merger of Niagara Mohawk Holdings, Inc., Niagara Mohawk Power Corporation, National Grid Group plc and National Grid USA. Under the merger, National Grid will purchase100% of Niagara Mohawk's common stock to form the ninth largest electric utility in the United States. The merger will result in a service territory of 29,450 square miles in four states serving 3.2 million customers. Its combined annual operating revenues will be $6.7 billion.

Specifics of the merger include:

The agreement saw the participation of 36 different parties over an 8 month period. The merger still requires approval of the Securities and Exchange Commission under the Public Utility Holding Company Act.

On November 20th, The New York State Board on Electric Generation Siting and the Environment granted developer SCS Energy a permit to construct and operate a new 1,000 megawatt electric generating facility in Astoria, Queens County. SCS Energy filed its application to build the Astoria Energy project, under Article X of the Public Service Law, on June 19, 2000.

The plant will be a natural gas-fired combined-cycle generating facility located on a 26 acre oil terminal in Astoria. The project site is zoned for heavy manufacturing and has existing infrastructure that will be refurbished to provide the facility with approximately 12.6 million gallons of low sulfur distillate oil fuel. The plant will use oil as a backup fuel for electricity generation. The plant will sell its 1,000 megawatt output into New York's competitive wholesale market.

The permitting of Astoria brings the total number of plants permitted under the Article X process to five (5). The other four (4) projects, and projects sponsors, that have received permits and their estimated in service dates are:

According to the records of the Public Service Commission (PSC) the following four (4) projects have received compliance determinations and are nearing certification and permitting. The projects are as follow:

The earliest in service date for the above referenced four (4) projects are in the 2nd and 3rd quarters of 2004.

Five (5) other projects have submitted applications under Article X and are beginning the process under the application phase:

There are also 9 in the stages prior to submitting an application.

The New York State Independent System Operator has announced the implementation of its "virtual bidding". Under this program, companies with appropriate credit qualifications are allowed to "virtually" buy and sell energy. The ISO received FERC approval for the program on October 25, 2001. So far 20 companies have signed up to participate.

According to the ISO, the process works as follows; A company takes a position in the Day-Ahead market by buying or selling "virtual" energy, then must cover its transaction in the Real-Time market in order to settle up. The difference between the prices in the Day-Ahead and Real-Time markets dictate the gain or loss experienced by the company doing the virtual trading.

Virtual supply and virtual load transactions are financial transactions only and have no effect on Real-Time physical energy consumption. Further, the process does not compromise the physical commitment of energy resources for the purpose of system reliability. The process is designed to help even out price differences between markets as traders seek to arbitrage the price differences between markets. It also provides a means for existing market players to hedge themselves against risk.