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SBC Expansion Proposal
Comments filed with the PSC by the Business Council

November 20, 2000

Ms. Janet H. Diexler, Secretary
Public Service Commission
Agency Building 3
Empire State Plaza
Albany, New York 12223-1350

Dear Secretary Diexler:

RE: PSC-30-00-0005; Comments on Staff Proposal to extend and expand the System Benefits Charge (SBC)

The Business Council of New York State, Inc., a statewide association of more than 4,000 companies, chambers of commerce, and regional associations, has reviewed the above-captioned proposal in detail and in consultation with its members. We recommend that this proposal be significantly restructured or reduced for commercial and industrial customers—and that the program extension be limited to two years.

We support many of the goals of the current System Benefits Charge —especially low-income assistance programs, and energy conservation. New York has a good record of energy conservation. This state ranks 49th among the 50 states, for example, in overall energy consumption—about 35 percent below average. New York is 48th in average residential electric usage, with consumption that is almost 40 percent below the national average. Conservation efforts are good for the environment, are good for the economy, and can work to reduce electric rates.

We have concluded, however, that this proposal to increase significantly the cost and the application of the SBC—and to extend these higher costs for five full years—is risky and unwarranted. It would further raise the energy costs faced by industrial and commercial users, at a time when high energy costs are already acknowledged to be a significant drag on New York State's economy. The five-year time frame would weaken accountability in the SBC program, at a time when we need to ensure that the program's benefits outweigh its costs. We are concerned, also, that this lengthy extension is being considered in a vacuum, without New York moving with comparable speed to meet the universally acknowledged need for siting additional electric generating capacity.

The Business Council has received and studied extensive comments from our member companies on this issue. We have heard from those opposed to the rate increases that would finance the expanded program, as well as from those who have made use of the program. The majority of the input we received was in opposition to the rate increases proposed under this proceeding.

Many of our industrial members, for whom the cost of energy in New York is a top concern, are especially alarmed that the non-bypassable provisions of this proposal would force them to pay this added cost for the first time. Some of them will see SBC rates equivalent to a rate increase of 0.14 cents per kWh.

An additional, major concern of The Council regarding the expansion of the program under this proposal is the state's ability to actually achieve the energy savings this program targets.

We agree with the advocates of this program that if its load reduction goals are achieved, there would, in all likelihood, be net energy dollar savings for electricity rate payers overall. But the reverse is also true—if the goals are not achieved, this program will increase, rather than reduce, energy costs overall.

The intended goal of this program is to reduce electricity demand in New York State by an estimated 1,019 to 1,269 megawatts by the end of the program period (2005). Under this proposal, SBC funds will be targeted not only to overall conservation, but specifically to "peak load reduction."

These goals, if achieved, would represent a very large increase over the 125 megawatts of energy savings reported as having been achieved by this program to date. (And indeed, it should be noted that there is not unanimous agreement that such savings have been caused by the existing SBC program; the proposal before the Commission includes significant new research funding for the specific purpose of investigating the issue of causality.) This uncertainty is a key reason we are convinced that a five-year extension is not warranted at this time. We must be able to quantify results before making any long-term commitment to a program of this scale.

And even advocates of this proposal agree that New York's future electric needs cannot be met by this means, alone. We have spoken forcefully with respect to the need for more generating capacity in New York State. New York needs a concerted plan, one that combines conservation with new capacity—not a five-year commitment to a systems benefit charge of uncertain impact, while decisions on capacity are delayed to some uncertain point in the future.

To be specific, The Business Council submits these objections:

• We oppose the expansion of the charge from a cumulative total of $78 million per year to $139 million per year. With New York's energy costs being among the highest in the nation, we suggest that the rate remain at its current level for industrial and commercial customers.

• We oppose the extension of the SBC for five years starting January 1, 2001. Under the new proposal, the charge is extended beyond the initial three years by an additional five years, for a total of eight. In effect this would alter the settlement agreements by singling out only one provision, the SBC, and increasing and extending it. We believe any extension should be limited to two years, so the program's effectiveness can be addressed.

• We oppose structuring the new SBC charges in a way that makes them entirely non-bypassable. Under the previous SBC program some large customers in commercial and industrial classes were allowed to bypass the rate. Since the new SBC is not subject to bypass, some customers in commercial and industrial classes will see SBC rates that amount to a rate increase of 0.14 cents per kWh. This abrupt increase in their energy costs cannot help the state's economy.

In summary, we recommend the extension of the System Benefits Charge for no longer than two years with the suggestion that the funding levels for commercial and industrials be restructured or reduced, during which time the actual reduction in projected load management can be determined. We stress the need to restructure this proposal to take into account the energy costs faced by commercials and industrials.

Sincerely,

Daniel B. Walsh