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Government Affairs Albany Update

February 1, 2002

New York and New England ISOs Explore Common Markets

The New York Independent System Operator (NYISO), the entity charged with operating and overseeing the electricity markets in New York has announced an agreement with the New England ISO (ISO-NE) to move the two systems closer. The agreement provides for the exploration and development of a common electricity market place for the two regions based on a common market design. The two ISOs have also agreed to jointly evaluate the feasibility of creating a Regional Transmission Organization (RTO) in the northeast. The development of common markets and a Northeast Regional Transmission Organization (NERTO) is intended to enhance system reliability and provide market benefits to both regions while seeking to comply with the Federal Energy Regulatory Commission's (FERC) objective of creating seamless regional electricity marketplaces.

The agreement between the two ISOs is the first step in trying to address a number of issues including market design, transmission planning and technology assessments. The goal is to combine many of the features of the Standard Market Design (SMD) under development by ISO-NE and best practices from the NYISO markets. The two ISO's are seeking input from state regulators and market participants. The goal is to obtain FERC approval later this year.

The joint agreement between the two ISOs has received the support of all of the regional Canadian electricity market operators. The Ontario Independent Market Operator (IMO), TransEnergie (Hydro-Quebec), New Brunswick Power, and Nova Scotia Power as well as the Northeast Power Coordinating Council (the international organization responsible for assuring bulk power system reliability in Northeastern North America), all expressed support for the potential benefits of the agreement.

For more information on this issue and the press release access the New York ISO web page; http://www.nyiso.com

Transportation Budget Discussed at Public Hearing

On January 29th State Legislators heard testimony from leading transportation officials from both the public and private sectors on the 2002-2003 Executive Budget as it relates to transportation. Legislators heard comments from the NYS Department of Transportation, the Metropolitan Transportation Authority, the railroad industry, and the construction and engineering sectors.

Speaking on behalf of the Department of Transportation, Commissioner Joseph Boardman outlined the DOT's priorities for 2002-2003. According to DOT, the budget construction levels will total $1.75 billion this year (continuing last year's level). Within the budget is $281.5 million for local capital programs, of which $241.8 million is for CHIPS Capital and $39.7 million for Marchiselli programs and $620 million for the Engineering Services Program. The Commissioner also detailed the operating assistance portion of the budget, approximately $1.7 billion for 2002-2003.

Commissioner Boardman outlined the DOT's role in the response to the World Trade Center Attack which included, among other items, a focus on proposals through the Governor's Office and the Department of Environmental Conservation to help the City recover from the attack. These efforts centered on Congressional proposals, such as air quality conformity waivers (under the Clean Air Act) and TEA-21 planning requirements for the New York Metropolitan Transportation Council (NYMTC). Legislation was also needed to help NYC demonstrate conformity with certain aspects of Federal Highway Administration (FHWA) regulations and the federal Emergency Relief Program (ERP).

Also of note were the Commissioner's comments on The NYSDOT Border Crossings and International Trade Corridors Imitative. The DOT will be attempting to recognize, promote and enhance the New York-Canada crossings and trade corridors in partnership with stakeholders. In 2000, this trade relationship resulted in $365 billion in total merchandise trade. This issue has become a priority for The Business Council in 2002 and an ad hoc committee has been established to work with our chamber members, interested companies and entities such as the DOT. The Commissioner also discussed an on-going commitment to the conversion of Route 17 to I-86, work zone safety, high speed rail, and industrial access programs ($15 million).

The hearing was held shortly after it was learned that the federal budget proposed by the President included a $9 billion cut in federal aid to state highway and bridge programs. The federal reductions could mean a loss of approximately $371 million to New York State. The Commissioner told legislators that the DOT had not made any firm decisions about where the department would adjust its budget if the federal money was not restored in the appropriations to New York State.

On behalf of The Empire State Rail Freight Alliance (an Albany based-lobbying group of New York railroads), CSX Railroad Vice President John Casellini told legislators that the most important issue facing railroads was the reform of New York State's arcane and unfair rail taxation system. Under New York law, railroads pay a disproportionately high amount of taxes per rail mile when compared with neighboring states. As a result of this situation, the Legislature, at the urging of the railroads, and with the support of The Business Council, introduced legislation to correct this anomaly in 2000. This tax reform bill was negotiated and agreed upon in 2000 but the session adjourned prior to its passage in both Houses. In 2001 the bill was included in the Executive budget but was not passed as part of the bare-bones budget later in the year. Nor was the legislation passed as a stand alone piece of legislation in 2001. Due to the expiration of the Conrail settlement and the reinstitution of lawsuits by the Class One railroads in New York State, the tax issue has reached a critical situation. The necessity for court challenges would be alleviated if tax reform legislation is enacted. This tax situation, according to CSX, is preventing them from instituting several multi-million dollar projects that it has planned for New York State.

Also testifying were representatives of the construction and engineering industries who stressed the need for additional funding in the budget for transportation initiatives. The New York State Transportation Engineering Alliance (NYSTEA) submitted testimony referencing the 2001 study, Benchmarking Highway and Bridge Performance in New York State, commissioned by the New York Roadway Improvement Coalition (NYRIC). This study, which used federal statistics, found that 40% of New York's bridges and pavements were structurally deficient. In light of this study, these industry representative advocated for an increase in funding levels and also suggested a number of initiatives for funding streams.

For the testimonies submitted at the hearing contact the Public Information Offices of the Assembly (518)455-4218, or
Senate (518)455-3216.