Testimony
of The Business Council of New York State before
The
Assembly Committee on Energy
The Assembly Subcommittee on Renewable Energy
Hearing to Examine the Policies and Implementation Plans
For the Renewable Portfolio Standard
March 7, 2006
Testimony
of The Business Council of New York State
Good morning Chairman Tonko, Chairman Karben. I am Anne Van Buren,
Director of Energy and Telecommunications for The Business Council
of New York State. The Business Council of New York State is the
state's largest statewide employer association, representing more
that 3,000 businesses, chambers of commerce and other local and
regional business organizations across New York. Our membership
includes numerous owners and operators of major electric generating
facilities, investor owned utilities, as well as the major industrial
and commercial businesses for whom the cost and reliability of
electric power are important issues. Therefore, we have a significant
interest in the development and implementation of a Renewable Portfolio
Standard.
Let me be clear from the start - we are not opposed to
renewables. Our companies have been the beneficiaries
of the state's most abundant form of renewable energy - hydropower. What
we do object to is being forced to subsidize those renewables
that are not cost competitive.
As I am sure you are aware, we have been a party to the RPS proceeding
conducted by the Public Service Commission and have filed numerous
comments on this subject over the past several years. The heart
of our testimony focused on two things. One - that the
implementation of an RPS not negatively impact the price of electricity in
New York State. And two - that reliability not be negatively
impacted, as reliability is a critical issue to most of
the companies we represent.
During the commission's deliberations in the RPS proceeding, there
was considerable disagreement on the feasibility and potential
impact of an aggressive renewable program.
Because of the potential impact, the commission proposed that
the RPS program be reviewed in 2009. At that time, the commission
states in its Order, they will review "costs and benefits associated
with the program, modifications to the list of eligible resources,
and modifications to the delivery requirement." There may be a
need for mid-course adjustment but there may also be a need for
earlier adjustments
As part our comments during the proceeding, we urged an earlier
review date to gauge how well the program was working and to determine
if our expressed concerns on price, reliability and capacity were,
in fact, occurring.
We applaud this committee for having this hearing. This program
should be monitored and measured on a regular basis, and similar
hearings or reviews by the Legislature or the PSC could serve this
purpose.
The PSC's cost projections for the RPS program begin at more than
$24 million in 2006, ramping up to over $167 million in 2013, totaling
about three-quarters of a billion dollars for the life of the program.
And if you add on the voluntary program LIPA is initiating, the
cost goes well over a billion dollars. And we would point out that
these are only projections - that due to the speculative nature
of the factors driving the cost study (location and output of renewables
coming on line, the federal Production Tax Credit, retirements
of existing generation, etc.) there is no way of knowing with any
certainty if these cost projections are accurate.
New Yorkers are still paying millions of dollars in excess power
costs due to the ill-fated "6-cent law". We should not be so eager
to run the risk of repeating the problems inherent in mandatory
programs.
According to the Energy Information Administration, in 2004, New
York's average energy price for all sectors was 57% higher than
the national average. In fact, New York is a leader in many areas
that increase the cost of doing business - including corporate
taxes, workers comp costs, etc.
The last New York State Energy Plan, adopted in June of 2002,
observed that "energy prices tend to be important factors in business
location and expansion decisions, particularly for energy-intensive
businesses... Corporations routinely favor locations that have
the greatest profit potential. Less profitable facilities will,
at best, not be expanded. At worst, they will be closed, with a
resultant loss of jobs." The plan went on to say that "the cost
of energy, however, remains an obstacle to overcome in New York's
efforts to retain, expand, and attract business."
Reliability is also of paramount importance to our companies.
The NYISO's mission is to maintain the reliability of the bulk
power system and administer the wholesale market for electricity.
To this end, the ISO released, in December, 2005, the state's first
Reliability Needs Assessment (RNA) - an important component of
New York's long-range Comprehensive Reliability Planning Process.
The RNA evaluates generation adequacy and transmission reliability
over a ten year planning horizon, and identifies the needs of New
York's electric grid. The RNA states that the forecasted system
does not meet reliability criteria for the first five year period
- or the 2nd five year period for that matter.
The need is particularly acute in Southeast New York State (the
lower Hudson Valley through Long Island), however, the greatest
potential for siting renewable generation will come in upstate
areas, particularly Western New York.
Additionally, given the long lead times needed for the installation
of both generation and transmission, and the RPS's predilection
to promote generating sources that are periodically unavailable
(often at peak demand periods) at the expense of baseload generation,
how can we assure reliability to high load areas in need of power?
For years, Article X of the Public Service Law encouraged development
of power plants by providing a "one-stop- permitting process" that
reduced the time and approvals needed for such plants - without
sacrificing environmental oversight. The law expired at the end
of 2002.
Without expedited review and permitting, New York will suffer
a shortage of generation capacity before too long. The more demand
rises in coming months and years, the more consumers will pay for
lack of additional generation.
Adding significant amounts of wind power does not negate the need
to add more baseload generation, to ensure system reliability during
periods of peak demand.
Until we add significant baseload capacity in this state
we are not likely to reap the benefits of a truly competitive
marketplace where supply will respond to demand. Supply
is now thwarted by an expired siting law process and by uncertainty
in the financial markets for construction of new baseload facilities.
The bottom line is New York needs more baseload power. Businesses
and residents alike use more electricity than ever before. We can
import some power from other states and Canada, but for cost and
reliability reasons, we need more generation capacity right here
at home - as well as improved transmission and distribution lines
to deliver power where its needed.
Rather than striving to increase the cost of electricity, state
leaders should fulfill the promise of the State Energy Plan by reducing
government-mandated surcharges on energy bills.
Such efforts, along with a determined effort to site new generation
and transmission facilities, will pay off in more competitive energy
costs for both residents and businesses - and more good jobs for
New Yorkers.
Thank you for your time. I will be happy to answer any questions
you might have.
Respectfully submitted,
Anne Van Buren
The Business Council of NYS
152 Washington Ave.
Albany, New York 12210
