Staff Contact: Ken Pokalsky

April 14, 2005

Mr. James J. Zucchetto
NAS Board on Energy and Environmental Systems
500 Fifth Street, N.W.
Washington, D.C. 2001

RE: Project Title: An Assessment of Alternatives to Indian Point for Meeting Energy Needs

Project I.D. #: BEES-J-03-03-A

Dear Mr. Zucchetto:

The Business Council of New York State and The Independent Power Producers of New York, appreciate this opportunity to provide the Board and its Committee on Alternatives to Indian Point for Meeting Energy Needs with input relevant to its study reviewing options for replacing current electric power from the Indian Point Nuclear facility (Indian Point) with alternative means for meeting electric power demand and associated energy services.

Since September 11, 2001, a number of people have called for the closing of the Indian Point facility, maintaining that the plant is not safe. The physical structure of the site has tremendous capabilities, designed to safeguard plant personnel and the community even under the most catastrophic scenarios. On-site security personnel maintain constant contact with local, county, state and federal security forces. Access to the property is restricted to identified personnel only, and the roadways are controlled by multiple barricades. The fact is that Indian Point is one of the most secure non-military facilities in the country.

Indian Point provides 20 to 30% of the power to the metropolitan New York region. This “base-load” plant is capable of providing 2000 MW of electricity around the clock, 365 days a year. The power is relatively low cost and produces electricity without emitting nitrogen oxides, sulfur dioxide or carbon dioxide as do other fossil fuel generated plants. The air quality benefit is an important feature of this facility that should not be taken lightly in any examination of alternatives to the plant. In addition, the plant provides crucial voltage support to the electric grid.

Headlines have drawn attention to concerns about fuels, especially the rising price of natural gas and oil. Fears of interruptions of oil exports from the Middle East roil the energy market. Meanwhile, state attorneys general seek stiffer enforcement of environmental rules which have brought lawsuits against owners of coal-fired power plants. And a group of Northeastern states are looking at a regional cap on carbon dioxide emissions. Electricity consumers benefit when electric power supply is secure and stable. Diverse fuel resources for power generation reduce the chance that embargoes, strikes, transportation constraints, or acts of war or unrest will disrupt power production. Fuel diversity also reduces exposure to soaring costs of any single fuel.

Converting Indian point to natural gas generation (the only realistic alternative given New York’s current regulatory climate) would be a significant undertaking. It would mean retiring and decommissioning the nuclear units and replacing the nuclear turbines with modern, efficient, combined cycle gas turbines. The gas capacity requirements would necessitate siting a pipeline at least as large as the proposed Millenium pipeline, which is having difficulties in obtaining approval from New York’s regulators. And committing such a large volume of gas to electricity would increase upward pressure on natural gas prices. Even if all ran smoothly, it would take 8 to 10 years to decommission this nuclear site and construct a natural gas facility.

New York’s energy utility industry has been restructured in recent years, and the state has adopted a competitive approach to acquiring needed generation. Traditional utilities were required to divest themselves of generation, and plants were purchased by independent companies who sell power in an open, competitive and unregulated market. Unfortunately, due to the collapse of ENRON and other problems, access to capital has tightened, making it difficult for developers to build major generating facilities.

Additionally, Article X, New York’s power plant siting law, expired at the end of 2002, and to date the Legislature has failed to re-enact a successor statute. By allowing this law to expire, the state sent a clear message to the generation and development community that New York’s legislative/regulatory climate is not conducive to investment in generation. Under the new restructured environment, investors assume all the risks involved, and are thus understandably hesitant to build in an uncertain legislative/regulatory climate.

Over the last few years New York has had to take dramatic steps to meet its growing power demands. This dire need for electricity (particularly in the downstate, metropolitan region) has led the New York Power Authority (NYPA) to placing emergency generation in New York City. The Independent System Operator (ISO) and the New York State Energy Research and Development Authority (NYSERDA) have instituted peak load reduction programs to curtail load on high consumption days. While these stopgap measures have helped avoid blackouts or brownouts, the key to alleviating shortages of power will continue to be the addition of base load generation capacity.

Consequently, we believe that given all the constraints on building new generation in New York, and the dire need for additional capacity in the region, whatever funds are available should be used to build new generation, and not to convert or replace existing generation that is reliable, safe, environmentally benign and relatively inexpensive.

We thank the Committee for this opportunity to provide this information, and we respectfully request that this letter be included in the formal record being developed in this matter.


Daniel B. Walsh
President President and CEO
The Business Council of New York State
Gavin Donohue
President & CEO
Independent Power Producers of New York State, Inc.