NYPA President Says Private Sector Should Build New Power Plants

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Mr. Zeltmann's remarks

May 12, 2004

FOR IMMEDIATE RELEASE

ALBANY—New York Power Authority (NYPA) President and Chief Executive Officer Eugene W. Zeltmann said Wednesday that NYPA does “not foresee the need” to build any more new power plants of its own and that it expects private developers to provide sufficient additional generating capacity for the state.

“We believe the private sector should be able to meet the challenges and capitalize on available opportunities in our market,” Zeltmann said at the Independent Power Producers of New York’s annual legislative conference at the Desmond Hotel.  “You construct power plants, you take it very seriously and you’re very good at it.”

Zeltmann said the Power Authority anticipates that the most efficient way to meet its future capacity requirements will be to buy the electricity from private sources “unless we have to build a facility in response to a compelling public need that is not being fulfilled” by the private sector.

He noted that NYPA, the nation’s largest state-owned electric utility, announced earlier this week that it will issue a request for proposals on June 4 to supply up to 500 megawatts (mw) of capacity and sufficient energy to help serve its government customers in New York City for up to 20 years.  The purchases would begin after the shutdown of the Authority’s 875-mw Charles Poletti Power Project in Queens, scheduled to take place as soon as February 2008 and no later than January 2010.

“Through our competitive bidding process, the Power Authority is giving New York’s independent power producers the opportunity to replace the output of Poletti,” Zeltmann said.

“We recognize,” he said, “that it is vitally important to New York’s power industry that there be a competitive private sector.”

The Power Authority owns and operates 17 power plants with a total installed capacity of more than 6,100 mw and has long been one of New York State’s premier power generators.  In 2002, in response to potential capacity shortages and to help serve its government customers, it began construction at the Poletti site of a clean, new 500-mw plant that is scheduled for completion next year.  The NYPA system also includes more than 1,400 circuit-miles of transmission lines, accounting for about one-third of the state’s high-voltage transmission.

As with generation, Zeltmann said NYPA “does not foresee building any new transmission lines unless we perceive that we must do so in response to a compelling public need.”

He said that, ideally, the competitive power market will dictate where merchant transmission projects should be built by private developers, but that the market at times may not send the proper signal.

“In such cases,” Zeltmann said, “we believe that any lines necessary to maintain reliability can most effectively and efficiently be built by the utilities that directly serve retail consumers and that this should be done through the regulatory process. The only circumstances under which the Power Authority would foresee building new transmission would be if this process failed and there were a compelling reliability need.”

Zeltmann said the Power Authority’s massive hydroelectric projects on the Niagara and St. Lawrence rivers will remain central to its operations and to the economic health of Western and Northern New York.  However, he noted that NYPA obtains all the power for its other economic development programs, including the Power for Jobs initiative for businesses and non-profit entities, from the private sector.

He said a rebate program that Gov. George E. Pataki has proposed to mitigate electricity cost increases for customers whose Power for Jobs contracts are expiring would “contribute further to the development of competition.”  He said that under the governor’s proposal, more than 450 mw of demand would move from Power for Jobs to the retail market and that customer savings and job protection would continue at lower cost than under the current program.

The NYPA president told the independent power producers that the Authority’s expanding emphasis on energy efficiency and clean new power sources such as fuel cells and solar panels can also “work well with what you do.”

“Our goal here is not to preempt the field,” Zeltmann said, “but to demonstrate the commercial viability of various technologies so that private developers might be willing to take them further.”