ISSUE IN BRIEF: Power For JobsStaff Contact: Ken Pokalsky
The Business Council supports a continuation of the Power for Jobs program to help energy intensive and at-risk companies remain competitive, and help them retain and add to their in-state employment. Since all current Power for Jobs allocations will expire by the end of 2005, timely legislative action is essential.
Program Background - The PfJ program provides reduced cost power to entities that make specific commitments regarding job retention and growth. About 700 businesses and not-for-profit organizations have benefited from the program since 1998. Overall, they account for nearly 300,000 New York State jobs.
PfJ power allocations were initially distributed over a three-year cycle, with each participant receiving a three year allocation. Year 1 contracts were extended by three years during the 2000 legislative session. In the 2002 session, an extender was approved for year 2 and year 3 recipients, and a December 2005 sunset was placed on the PfJ program. In 2004, all current allocations were extended until the end of 2005, and participants were given the choice of contract extensions or a new “rebate” based benefit.
Need for PfJ – The same factors that justified the original PfJ statute – cost and capacity – continue to exist today. New York needs a program to provide lower cost power to energy-intensive industrial power customers – those with power demand of 100 KW or higher – that are at greatest risk of relocating or closing down.
Costs – While average industrial prices of 5.9 cents per kilowatt hour is only slightly above the national average, that figure reflects the beneficial impact of NYPA hydro power going to major industrial users. Without NYPA hydro power, the average industrial rate in New York rises to nearly 8 cents/kwh. Average rates for commercial users are even higher – at 11.6 cents/kwh, more than 54 percent above the national average.
Capacity -- Based on projected demand growth and the need for surplus generating capacity to support system reliability and price competition, The Business Council estimates a need for 9,200 MW of additional generating capacity by 2007. In May, 2004 the state ISO reported that, while 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.
Program Financing – Under the PfJ program, energy cost reductions come from several sources: the use of price-subsidized NYPA power, through competitive bidding for bulk power purchases, and through reduced charges by local power distribution companies (whose reduced revenues are offset by credits against their state utility gross receipts tax, or GRT, liability.)
Total PfJ program cost from 1998 through its current December ‘05 expiration date is estimated at $450 million, with about two-thirds of the costs coming from GRT credits, and the remainder through NYPA power discounts.
Executive Budget Proposal – The Business Council supports the additional one-year extension proposed in the FY 06 Executive Budget. Longer term, we recommend that the PfJ program – or an alternative program – focus on providing benefits to expanding and at-risk industrial and commercial customers for whom power costs are an essential competitiveness factor.