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November 21, 2000

Council urges state to restructure proposed new energy charge

The state's proposal to increase and extend for five years a charge that inflates New Yorkers' energy costs is "risky and unwarranted" and should be curtailed in duration and scope, The Business Council has told the New York State Public Service Commission (PSC).

The proposed systems benefit charge (SBC) should be restructured and reduced or eliminated for commercial and industrial users, and it should be extended for only two years while its actual effects on energy conservation are assessed, Business Council President Daniel B. Walsh wrote in a Nov. 20 letter to the PSC letter to the Public Service Commission.)

Moreover, the SBC and related conservation efforts should be coupled with more aggressive efforts to site new power plants, he added.

The current SBC imposes $78 million in charges to existing electricity bills in New York. It funds a variety of programs administered by the New York State Energy Research and Development Authority (NYSERDA). The PSC has proposed extending it by five years and increasing it to $139 million a year. The proposal would also eliminate the capability of large commercial and industrial users, who already have a clear financial incentive to conserve energy, to bypass the rate in some cases.

The effect of the proposal on energy costs: The proposed SBC "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," Walsh wrote.

He noted that some Council members have taken advantage of some programs funded by the SBC and have expressed appreciation for those programs. But he added that most members had expressed opposition to proposed rate increases.

Industrial members are especially concerned, Walsh noted, because they would not be able to bypass this charge. At present, New York State industries can bypass the charge on some energy purchases.

Because the new SBC could not be bypassed, industries in New York State would face an increase in energy costs of as much as 0.1 4 cents per kilowatt hours, Walsh noted. The Council is urging the PSC to restructure any new SBC to include provisions that allow large commercial and industrial users to continue to bypass the rate.

The uncertain connection between the SBC and energy conservation: The proposed SBC is intended to conserve energy through peak-load reductions, and Walsh acknowledged that if the goals of the program are fully realized, there would likely be a net energy dollars savings for electricity ratepayers overall.

"But the reverse is also true," he wrote. "If the goals are not achieved, this program will increase, rather than reduce, energy costs overall." The program outlines a goal of energy savings much higher than the savings attributed to energy-conservation programs funded by the current SBC.

It is not certain that the SBC is the actual cause of the savings for which it is credited, Walsh added, noting that the new SBC proposal includes money for research specifically intended to determine the cause or causes of energy savings attributed by some to the current SBC.

The need to increase supply: A top energy priority for business in New York is increasing New York's capacity, Walsh noted.

"We have spoken forcefully with respect to the need for generating more for more generating capacity New York State," he wrote "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.

Energy conservation in New York State: Business supports many goals of the SBC and the programs it supports, including energy conservation and low-income assistance programs, Walsh wrote. He noted that New York State already outperforms most of the nation in energy conservation, ranking 49th among 50 states in overall energy consumption, with overall energy consumption that is about 35 percent below average.

He also noted that New York State is ranked 48th in average residential electricity usage, with consumption that is almost 40 percent below the national average.