New York State Energy Planning Board
Draft 2009 State Energy Plan
Kenneth J. Pokalsky
Senior Director, Government Affairs
September 15, 2009
On behalf of The Business Council of New York State and our 3,000 members, I appreciate this opportunity to comment on New York’s Draft Energy Plan.
In the brief time available today, I will highlight the energy policy issues of greatest concern to our members. We will also be submitting additional detailed written comments on other aspects of the Draft Energy Plan.
The Business Council represents a diverse, statewide membership. While the vast majority of our members are industrial and commercial consumers of energy, we also represent generators, distribution utilities, and businesses focused on various aspects of green energy – equipment manufacturers, generators, and others.
Increasingly, our members are focusing on energy and carbon efficiency, and participate in state and utility assistance and incentive programs, including those provided through NYSERDA and the regional utilities.
FOCUS ON ENERGY COSTS
For the vast majority of our members, however, the energy issues of greatest concern are adequacy and reliability of supply and – most important - cost.
Year after year, the cost of energy is identified by our members as one of the most significant competitiveness issues facing New York’s business community.
The focus of this concern has been on electric power costs. Business in New York face per kilowatt hour electric power prices that range between 40 and 60 percent above national averages. As these costs figures reflect the benefit of low-cost NYPA hydropower for some energy-intensive industrial customers, the typical cost difference facing the average business customer in New York is even further above the national average.
Natural gas prices are also a concern. For 2008, industrial gas prices in New York remained about 35 percent above the national average (and continue to be well above national averages through 2009, even with significant declines in well head prices) with commercial prices averaging about 8 percent above national rates (albeit on a significantly larger consumption base.)
We estimate that bringing the commodity costs of electric power and natural gas for industrial consumers into line with national averages would produce aggregate, annual savings of close to $1 billion for our energy-intensive manufacturing sector.
Bringing these in-state prices into line with national averages for all categories of businesses would reduce costs by $5 billion or more.
STATE IMPOSED COSTS
In our view, the draft energy plan gives little recognition to the impact of state-imposed costs, and falls woefully short in terms of a strategy to lower energy costs. Overall, we believe the draft energy plan will increase, rather than decrease costs for the foreseeable future.
We recognize that there are advocates for inflating the cost of energy as a means to drive efficiency. This approach is counter-productive in a State that already has exceedingly high energy prices and the smallest carbon footprint in the country. The result of continued price pressure will ultimately be a departure of energy-intensive users to less carbon-friendly states without the beneficial fuel mix in place in New York.
The Draft Plan’s main cost-reduction strategy is increased energy efficiency. It projects that full achievement of the “15 by 15” strategy (a 15 percent reduction in usage through efficiency by 2015) would produce up to a 10 percent reduction in wholesale electric power costs (a reduction, on average, of between 0.4 and 0.9 cents per kwh). We believe a 10 percent cost reduction is a wholly insufficient cost reduction target.
Even with its reliance on “15 by 15,” the plan recognizes the challenges of achieving this objective, saying that it would “require a nearly five-fold increase in annual energy savings by 2015.”
Buried in a footnote, the draft plan also recognizes that “15 by 15” is not cost free, saying that its achievement could require doubling of our current per-kwh costs for efficiency programs.
Likewise, even though the plan provides at least passing recognition of the impact that state and local taxes have on energy prices, it says little about the array of recent state-imposed energy fees and assessments.
On top of New York’s high energy commodity prices, New York has added other cost burdens on energy consumers - the Regional Greenhouse Gas Initiative, the Energy Efficiency Portfolio Standard, the Renewable Portfolio Standard (“RPS”), the System Benefits Charge, and the recently increased Public Service Law §18-a assessment -- which collectively cost New Yorkers almost $1.5 billion annually, and this added cost will increase each year.
We believe that the State Energy Plan should commit to a moratorium on new energy surcharges, levies, and assessments - while honoring commitments to existing, cost effective initiatives designed to stimulate infrastructure investments.
Moreover, we need to reduce these add on costs as soon as possible. We applaud Senator Ranzenhofer and Assembly members Hawley and Calhoun for introducing legislation to repeal the ill-conceived $500 million increase in Article 18-a assessments.
New York must balance the benefits to be derived by investments in energy efficiency, alternate sources of electricity generation, and infrastructure with the costs of those investments and the burdens they place on New York’s businesses and consumers.
In addition to this array of taxes, fees and assessments, the state has implemented or will implement a host of new regulations that will impact energy costs. These measures include limitations on SO2, NOx, CO2, and mercury emissions; more stringent New Source Review requirements and regulations for cooling water intakes; and a new “policy” on considering GHG emissions and energy use under SEQRA.
We find that neither the plan nor the “Environmental Impact” issue paper provide the detailed assessment of the impact of environmental regulations on the energy sector called for in Executive Order #2. For example, the plan barely mentions the state’s restrictive “new source review program”, which will hamper efficiency investments in both the generation and industrial sectors.
The Energy Plan – and state leaders - needs to recognize that New York is already a national leader in environmental and energy efficiency efforts. New York’s power generation is already more than 40 percent more “carbon efficient” - on an emissions per megawatt hour basis – than the rest of the nation, reflecting our relatively high percentage of natural gas-based, hydro and nuclear generation and relatively low percentage of coal-based production, and the impact of various environmental regulatory programs. And our prices already reflect the cost of this leadership.
We need to do a better job of balancing proposed expansion of environmental restrictions with the impact of such restrictions on the ability of existing business to continue operating and on the attraction of new businesses to the State.
Overall, the state needs to ensure that all existing energy efficiency, demand response, and environmental emissions reduction programs and policies are cost-effective, and evaluate the cumulative impacts of the existing programs and initiatives on system reliability and energy prices.
Toward this goal, we support Governor Paterson’s Executive Order 25, and believe that a high level process for reviewing the cost and benefits of significant regulatory initiative is overdue.
The Draft Energy Plan highlights a number of energy policy objectives supported by The Business Council. These include:
- The need to develop a long-term alternative to the Power for Jobs and ECSB programs. Creation of a new, long term economic development power program – using NYSP hydro resources to provide an allocation-based benefit – is one of our economic development priorities, and we believe this should be a “must do” for the 2010 legislative session.
- Encouraging in-state energy production, including development of the Marcellus shale formation.
- Promotion of demand side management strategies, which already provide significant cost savings for many industrial customers.
- The need to upgrade and expand our energy transmission infrastructure.
- The recognition of the value of new in-state nuclear generating capacity, a policy direction that we believe is essential to meet the state’s ambitious GHG emission targets.
- The need for a new siting law for electric generation.
- The need for a statutory framework for carbon capture and sequestration, which will create the necessary legal framework to pursue clean coal technology-based generation in New York State.
On the other hand, the draft plan includes several issues of real concern to the Business Council. These include:
- In its discussion of both a power plant siting law and an updating of the Article VII siting process for transmission, the focus seems to be on public participation and intervener funding, rather than specific approaches to expedite the review and approval of necessary infrastructure investments. We support adoption of a fuel-neutral power plant siting law that applies current standards but that does not establish new environmental compliance standards, and that includes reasonable limits on intervener funding.
- The commitment to implementation of Executive Order 24, which sets a target of an 80 percent reduction in greenhouse gas emissions by 2050. The Business Council does not support additional state level GHG emission limits outside the context of a national program.
- Increasing the target for electric power generation from renewable sources to 30 percent by 2015, regardless of the cost of achievement.
- The suggestion that New York adopt additional state-level, product-specific energy efficiency standards, which would add additional New York State only burdens on our product manufacturers and the in-state users of those products.
We also strongly disagree with the state’s continued opposition to the re-licensing of Indian Point units 2 and 3. We believe the state’s opposition to continued operation of Indian Point directly contradicts several of the energy plan’s main objectives – development of instate energy supplies, maintain system reliability and reduce greenhouse gas emissions. The draft plan itself recognizes that closure of these units mid-decade will result in increases in both costs and CO2 emissions. The loss of 2,000 MW of non-emitting power generation in the downstate region – up to 40 percent of the region’s generating capacity - would leave a significant gap in the state’s energy and environmental plans, and subject the downstate economy to additional energy price and reliability risks.
To support revitalization of our state’s economy, New York needs to make energy prices more competitive with the rest of the nation.
While New York has historically been a national leader in environmental and energy policy, the state needs to be aware of the economic costs imposed by its layering of environmental and energy initiatives.
We urge caution in the consideration of new energy and environmental public policies and programs or the expansion of the policies and programs included in the draft plan; we also urge a review of the broad array of existing regulations and policies may warrant review and revision.
If the costs imposed on New York businesses far exceed the costs imposed on businesses operating in other states and nations, the result will be the further decline of New York’s economy and the loss of more businesses and jobs.