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ISSUE IN BRIEF: Article X (Power Plant Siting)

Staff Contact: Ken Pokalsky

New York business and industry relies on an affordable and reliable supply of electricity, and New York State needs significantly more electric generating capacity. However, New York is not siting and building enough generation to keep pace with the state's growing demand for power.

The Business Council believes that re-enactment of a streamlined Article X law for siting major power plants is an essential step toward meeting the state's long-term energy needs.

Over the past several years New York has had to take dramatic actions to meet its growing power demands. The state's dire need for more electricity has led the New York Power Authority (NYPA) to place 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 stop gap measures have helped avoid brownouts or blackouts, the key to alleviating shortages of power will continue to be the addition of base load generation capacity.

In 2001, The Business Council published The Power To Grow, a report detailing the adverse impact of a failure to site and build more generation in New York State. If we fail to site more plants, New York's residential, commercial and industrial consumers will face shortages, higher prices and risk having demand exceed supply. We have monitored the power markets over the last three years and have reaffirmed the need for more in-state generation. Similar findings have been made by other leading energy and business groups from around the state.

The ISO has published a series of reports detailing New York's need to add additional base load generation. Starting with Power Alert I: New York's Energy Crossroads (2001), Power Alert II (2002), and Power Alert III (2003), the ISO has made it very clear that New York's electricity markets would be improved if more capacity is added. In its May, 2004 report, Power Trends, the ISO specifies that although approximately 3,000 megawatts of power have been installed in New York since 2001, several thousand more megawatts are needed to maintain reliability of the electric system.

Article X: The first step in the building of new base load generation is the siting law. The law governing the power plant siting process, Article X of the Public Service Law, expired on 1/1/03. By allowing this law to expire, the state sent a clear message to the generation and development community - New York's legislative/regulatory atmosphere NOT conducive to investment in generation. With the deregulation of the electric power marketplace, the economic risk of building new generation no longer falls on the electric customer. Under the old regulatory system, utilities were responsible for building enough generation to satisfy their customers' needs, and the costs were passed along to those customers. Under the new restructured environment, investors assume all the risks involved, and are thus understandably hesitant to build in an uncertain legislative/regulatory climate. Generation companies may instead opt to build in other states that offer public support and regulatory certainty conducive to billion of dollars in investment. To date the Legislature has failed to reenact a successor statute.

A renewed effort needs to be made to insure that New York State sites and builds enough generation to support its growing electricity needs. The Business Council supports the enactment of a power plant siting law which provides a streamlined, one-stop shopping program, as did the expired statute. (Such as S.5536 and S.5673-A from the 2003 - 2004 session.) On the other hand, we will oppose legislation that imposes costly regulatory and procedural burdens that make it virtually impossible to site a power plant.

Article VII Improvements: In addition to building more generation, New York needs to provide an expedited and streamlined process for the reconstruction of existing transmission facilities in order to increase the transfer capacity of such facilities.

Transmission constraints not only result in expensive, ongoing congestion costs, but also inhibit the ability of the system to support the operation of an efficient, economic wholesale electricity market.

The Business Council will work to facilitate the development of electric and natural gas transmission infrastructure in 2005, including electric transmission and natural gas pipelines, and liquefied natural gas (LNG) facilities.