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Government Affairs Albany Update

February 7, 2003

Speaker Silver Announces New Committee Chairs

Speaker Silver announced this week the new Committee Chairs for 2003. They are as follows:

Aging - Steve Englebright
Agriculture - William Magee
Alcoholism & Drug Abuse - Jeffrey Dinowitz
Banks - Catherine Nolan
Children & Families - Roger Green
Cities - Scott Stringer
Codes - Joseph R. Lentol
Consumer Affairs & Protection - Audrey I. Pheffer
Corporations, Authorities & Commissions - Richard Brodsky
Corrections - Jeffrion L. Aubrey
Econ. Dev., Job Creation, Commerce & Industry - Robin Schimminger
Education - Steven Sanders
Election Law - Keith Wright
Energy - Paul Tonko
Environmental Conservation - Thomas DiNapoli
Ethics and Guidance - Mark Weprin
Governmental Employees - Peter Abbate
Governmental Operations - RoAnne Destito
Health - Richard N. Gottfried
Higher Education - Ronald Canestrari
House Operations - James Gary Prentlow
Housing - Vito Lopez
Insurance - Alexander B. Grannis
Judiciary - Helene Weinstein
Labor - Susan John
Libraries & Education Technology - Sandra Galef
Local Government - Robert Sweeney
Mental Health - Peter Rivera
Oversight, Analysis & Investigation - Jeffrey Klein
Racing and Wagering - Alex Gromack
Real Property Taxation - Brian McLaughlin
Rules - Sheldon Silver
Small Business - Darryl C. Towns
Social Services - Deborah Glick
State-Federal Relations - Ann Carrozza
Tourism, Arts & Sports Development - Joseph Morelle
Transportation - David F. Gantt
Veterans Affairs - Ronald C. Tocci
Ways and Means - Herman D. Farrell, Jr.

Council Advocates for Indian Point Power Plants

The Business Council, in a February 3rd letter to the James Lee Witt Associates, expressed support for Entergy Nuclear Northeast's continued operation of the Indian Point Energy Center. Entergy owns both Indian Point Nuclear Plants 2 and 3 as well as Plant 1 which has ceased operations. The James Lee Witt report was commissioned by Governor Pataki in 2002 and has been released in draft form. The public comment period on the draft report ends February 7th. The report was critical of the emergency plans surrounding the plant and took issue with many federal mandates surrounding evacuation and planning strategies. However, it should be noted that nothing in the Witt report claims that the plant is unsafe. Entergy has expressed continued interest in working with all interested parties in emergency planning and has spent millions on plant security improvements. Entergy is complying with the federal mandates that govern security and emergency planning at its facilities.

The closing of the plant would result in a loss of almost 2,000 megawatts of electricity severely impacting both price and reliability in the surrounding areas and New York City. As much as 15% to 30% of the New York City power supply is provided by the Indian Point Energy Center. Even if the plant were to be closed, emergency plans would still be needed since fuel and spent fuel rods would still be housed at the site. The only difference would be the loss of critical amounts of electricity from the site. This issue has state and national ramifications since there are 104 nuclear powered generating facilities in the United States who are governed by FEMA and NRC mandates and local and state compliance with them.

Last Friday, January 31st, New York State notified the Federal Government, specifically the Federal Emergency Management Agency (FEMA), that it could not certify the emergency plans for the four counties (Westchester, Rockland, Orange and Putnam) surrounding the Indian Point Nuclear facilities in Buchanan, Westchester County. The state informed FEMA that it could not certify the plans, which are prepared by state, local and plant officials, because the four counties would not certify them. The state is charged with an annual certification that amounts to a "checklist" of items with which localities must comply -- drills, training, emergency plans, evacuation routes, sirens, etc. The state is now looking to the federal government for input. The Nuclear Regulatory Commission requires a FEMA-approved plan as a condition of a plant's operating license. NRC has never closed an operating plant against the wishes of the operators of a plant. The federal government, through FEMA, has asked the state to renew its review of the plans and is working to gather more information including the final recommendations of the Witt Report.

William Flynn Confirmed as Public Service Commission (PSC) Chairman

William Flynn was appointed by Governor Pataki to head the Public Service Commission on January 4, 2003 and was confirmed by the State Senate on February 4th. Mr. Flynn succeeds the Honorable Maureen O. Helmer who stepped down from the PSC Chairmanship on January 31st. Prior to his appointment, Mr. Flynn served as President of the New York State Energy Research and Development Authority (NYSERDA) and had previously served as Vice President, Treasurer, and Secretary to the Board of NYSERDA.

Mr. Flynn also serves as a member of the State Environmental Board, the New York State Energy Research and Development Authority Board, and the Disaster Preparedness Commission. He also serves on the State Board on Electric Generation Siting and the Environment. Mr. Flynn previously served as First Deputy Attorney General, Chief of Staff, and Special Counsel to State Attorney General, Dennis C. Vacco. In the early 1990s, Mr. Flynn was an Assistant United States Attorney and Executive Assistant in the Western District of New York.

The Public Service Commission regulates the state's electric, gas, steam, telecommunications, and water utilities and oversees the cable industry. The Commission is charged by law with the responsibility for setting rates and ensuring that adequate service is provided by New York's utilities. The staff arm of the Commission is the Department of Public Service. The Commission also exercises jurisdiction over the siting of major gas and electric transmission facilities and has responsibility for ensuring the safety of natural gas and liquid petroleum pipelines. Bipartisan by law since 1970, the Commission consists of up to five members, each appointed by the Governor and confirmed by the State Senate for a term of six years or to complete an unexpired term of a former Commissioner.

"Below Cost Sales" Vetoed By Governor

The "Motor Fuel Marketing Practices Act", also know as "below cost sales", was vetoed by the Governor as a pocket veto on January 31st. S.4522-B (Nozzolio) / A.1626-C (Tonko) would have established a retail sales system under which the sale of petroleum fuels are regulated along with a correlating penalty system. It provided for a three year sunset. In veto message number 48 of 2002 the Governor stated that he could not approve the bill in its current form. Under the bill, the sale of motor fuel at a price even slightly below cost could constitute a violation. Indeed, it could constitute a violation so long as the effect was to "injure" even a single competitor; notably, the bill does not preclude liability where the extent of the injury to a competitor is relatively minor. The Governor stated that it would have been extremely difficult to determining the cost of motor fuel sold by a particular seller based on the stipulations within the bill and that there may exist better ways to determine and enforce injury to competitors. He ended his message with an invitation to the sponsors to work with his staff on a new version of the bill this session.

Senator Bruno Urges Sweeping Tort Reform

Senator Bruno, in remarks made before on February 6th before a New York City breakfast forum sponsored by Crain's New York Business, stated Tort reform could save New Yorkers billions of dollars and ease budget gaps for both New York State and New York City.

Senator Bruno claimed that Tort reform can save a billion dollars by making common sense changes to a system that costs state taxpayers more than $14 billion, more than any other state in the country. Many leaders, including President Bush, Mayor Bloomberg and Governor Pataki have proposed tort reform measures, and almost a thousand groups and organizations in New York representing local governments and school districts, professional organizations, and businesses of every size in virtually every sector of the economy are pleading for relief from lawsuits that cripple the state and place an enormous burden on taxpayers. Senator Bruno also cited extensive research on the issue by The Public Policy Institute of New York State, The Business Council's research affiliate.

Senator Bruno also noted that twenty-three (23) states have adopted tort reform and that changing tort laws would be an effective alternative to raising taxes and cutting spending. The areas he cited specifically included:

The Complex World of Insurance Taxation

The major change to Tax Law Article 33 proposed in the 2004 Executive Budget has brought to the forefront the complex method of state taxation of insurance corporations. Here's a capsule description.

(1) An insurance corporation will calculate its state tax bill in its domicile (home) state and in each of the states in which it does business using each state's own tax law.

(2) The insurance corporation recalculates its state tax bill in its non-domicile states using its domicile state tax law. If use of domicile state tax law produces a higher tax bill in a non-domicile state, then the insurance corporation also pays a retaliatory tax to that state. The amount of the retaliatory tax is the difference between the higher recalculation tax and the original tax calculation in (1).

(3) The insurance corporation receives a retaliatory tax credit in its domicile state for retaliatory taxes paid to other states. In New York, the retaliatory tax credit is for 90% of the retaliatory taxes paid to other states.