Executive Speeches

Remarks of Joseph J. Seymour, chairman and chief executive officer, at the MEUA Annual Meeting, Niagara Falls, New York.

August 28, 2001

Good evening. It’s great to have this opportunity to meet all of you and to speak for the first time to the MEUA—one of the Power Authority’s oldest and most important constituencies.

I look forward to working with you as the Power Authority, under Governor Pataki’s leadership, seeks to meet your needs—and to draw on your expertise and support as we confront issues of mutual concern.

Certainly, it’s fitting that your annual meeting is taking place here in Niagara Falls—just down the road from our Niagara Power Project. This year marks the 40th anniversary of this magnificent project—which is, of course, the source of the low-cost hydroelectric power that has made your systems and your customers the envy of others throughout the state and the nation.

I understand that you’ll have an opportunity for a tour of the Falls and the project on Thursday. Don’t miss it.

And while you’re at it, please stop in and see the newly renovated Power Vista—our admission-free visitors center at the project. I presided at the ribbon cutting for the reopened Power Vista just this afternoon and—I can tell you—it’s quite a place.

I’m especially pleased to be with you tonight since I saw the benefits of public power firsthand as I was growing up. You see, I was lucky enough to live in Ilion, whose municipal system dates back to 1899.

After having lived in other places where electric rates are as much as five times what your customers are paying, I now realize how good I had it—thanks to public power.

Think of it—here we have the Power Authority producing what’s probably the cheapest electricity in the country and selling it to your systems at cost.

To an outsider, our relationship might be likened to that between a manufacturer and its exclusive distributors. We manufacture kilowatts at the Niagara Project and you distribute them to the homes and businesses in your service territories. But, of course, our relationship is much more than that and goes well beyond the more than $200 million a year that we save your customers on their utility bills.

It’s a classic example of public power in action—at its very best. And that’s a particular source of pride this year as the Power Authority celebrates not only Niagara’s 40th anniversary, but the 70th anniversary of the Authority itself.

Public power has been under increasing scrutiny since the deregulation of the electric power industry began several years ago. Early on, some were forecasting the death of public power. They assumed that the lower prices anticipated under deregulation and competition would ease us out of the picture.

Now, people are finding that public power has a great deal to offer in a deregulated marketplace. Earlier this year, the Wall Street Journal carried an article about the blackouts in California and how Universal Studios was negotiating with California lawmakers to allow it to get its power from a municipal utility instead of Southern California Edison.

California has even created a state power authority as a potential solution to the state’s energy problems—though, as I indicated, they’re about 70 years behind us.

I believe that public power isn’t simply about price or even adequate supply. And that’s evident in our multi-faceted relationship with you that I mentioned a moment ago.

One key facet of that relationship is improving your local economies.

As you know, for a number of years, we’ve had an economic development program tailored specifically to your systems. A total of 108 megawatts—half hydropower and the rest from other sources—was initially available for allocation to you for job creation in your service territories.

I understand that only 30 megawatts have been allocated thus far—helping to create about 2,000 jobs. There’s obviously a lot more that could be done with the remaining 78 megawatts. I know you’ve heard this before, but it’s my first time with you—so let me urge you to take advantage of this program.

Let’s work together to promote it and to make it the success it can be. Let’s develop a marketing brochure. Let’s join with the Empire State Development Corporation to let new and expanding businesses know all about the potential sites in your service territories and the benefits your communities have to offer.

Together, we can attract businesses that will create jobs, pay taxes, improve your communities and let your kids find work right in their own hometowns.

I can assure you, low-cost electricity is a powerful incentive. Overall, nearly 450,000 jobs throughout the state depend on economic Power Authority electricity—supplied under Governor Pataki’s Power for Jobs program and other initiatives.

Power for Jobs alone has helped to protect or create over 300,000 jobs since the first allocations just a little over 3 l/2 years ago.

This program was designed to ease the impact of high electricity costs on businesses and non-profit organizations until the benefits of a fully competitive power industry take hold. It’s done everything we’d hoped for—and far more.

Power for Jobs is just one very important way in which the Power Authority is working with Governor Pataki to help ease the path to a deregulated power industry in New York State. We’re active in this regard on a number of other fronts. And in each case, we’ve demonstrated the singular advantages of public power—and our ability to take on tough assignments that those in the private sector are unable or unwilling to accept.

In a span of just several months, we recently installed 11 small, clean gas-turbine generators in New York City and on Long Island—a remarkable achievement by any measure. The goal was to have them ready for this summer’s peak demand period.

Some said the gas turbines weren’t needed—that we were manufacturing a crisis. But, let me tell you, three weeks ago—as temperatures soared and records for electricity use tumbled—those new generators were essential to keeping the lights on.

Another vital role for us is strengthening the transmission system as competition puts new demands on it.

I believe you’ve heard about the first-of-its-kind device we’re installing at our Marcy Substation, near Utica, to improve the efficiency of existing lines and reduce the need to build new ones.

The innovation—called a convertible static compensator, or CSC—will use high-speed electronics to control electricity flow. It will let operators instantly transfer power from heavily loaded lines to those with spare capacity.

We completed the project’s first phase back in April—it’s strengthened voltage support and increased capacity on the statewide system by about 114 megawatts. The flow-control features will be added in the next phase, which we expect to complete next summer. The CSC will then be the world’s most advanced transmission control device and will boost statewide transmission capacity by 240 megawatts.

While we’re adding new generating capacity and shoring up the transmission system, we’re also very much aware of the need to use energy more efficiently.

This year, we’re investing more than $100 million in energy efficiency programs and clean, new energy sources. That’s more than 2 ½ times the figure for 1994—the year before Governor Pataki took office.

These initiatives had their origins in the successful WattBusters program that we implemented for many of your systems back in the 1980s.

More recently, we’ve worked with you to save energy through our successful Tree Power program. This past year alone, the Power Authority has helped your members obtain more than 1,000 trees at a shared cost of some $40,000. I saw a report that the Lawrence Berkeley National Laboratory found summer air temperatures to be as much as six degrees cooler in tree-shaded neighborhoods than in others—and that has clear benefits in cutting the demand for electricity to run air conditioners.

Obviously, there’s a lot going on in our business—and the Power Authority is heavily involved in much of it. But nothing is more important to us—or more central to our operations—than our hydroelectric projects at Niagara and on the St. Lawrence River.

Our upgrades and modernization programs at the two facilities—representing a total investment of more than half a billion dollars—continue to move ahead.

We’re currently installing the first of 16 new turbines at the St. Lawrence-FDR Project in a program that’s scheduled to run through 2013.

Here at Niagara, we’ve completed work on eight of the 13 units at the main generating facility—the Robert Moses Niagara Power Plant. This effort is scheduled for completion in 2006.

It’s important to understand that the work at Niagara will not significantly increase the amount of firm power. It will, however, enable us to provide more energy at times of greatest demand by making more-efficient use of the available water.

And that’s especially critical these days as sharply lower Great Lakes water levels cut hydroelectric production. As you know, we’ve had to reduce energy supplies to your systems and our other hydro customers because of low flows.

We’re grateful for your patience and understanding in this difficult period. While the situation is clearly beyond anyone’s control, we’ve tried to ease the burden by helping you to obtain replacement supplies and compensating you from a $17 million fund when actual energy shortfalls have exceeded our monthly forecasts.

I suggest that you attend the talk to be given tomorrow by Richard Mueller of our staff on the hydrology of the Great Lakes. Mr. Mueller will explain the situation we’re in, and how long it might take to get out of it.

Needless to say, a good deal of our attention at the hydro projects is focused on their pending relicensings.

At St. Lawrence-FDR, where the federal license expires in 2003, we plan to submit our application for a new license at the end of October. The terms and conditions of that

license will be of considerable relevance to you since they could well affect what happens at Niagara—where the current license runs through 2007.

Although the formal relicensing process at Niagara hasn’t begun, there’s already ample evidence that some in the community are looking to the relicensing as an opportunity to obtain significant financial benefits from the Power Authority.

We take our obligations to our host communities very seriously. In fact, Joanne Willmott of our staff will be speaking tomorrow about the benefits we bring to the Niagara area, and, again, I encourage you to attend.

But I think it’s important to re-emphasize a point that you’ve heard before—which is that we must strike a balance between appropriate local contributions and the need to maintain low rates for your systems and our other customers. Because, ultimately, excessive demands on the Power Authority can be met only through rate increases.

So I ask you to keep a close eye on the Niagara relicensing, to become actively involved and to make your views known.

The same goes for the broader issue of hydroelectric relicensing on a national scale.

Despite repeated efforts to streamline the process, we continue to face a situation in which federal relicensing regulations can impose significant delays and additional costs.

In 1986, the Federal Power Act was amended to require the Federal Energy Regulatory Commission to balance power generation considerations with energy conservation, protection of fish and wildlife, recreational opportunities, and environmental preservation.

While the goal was to accommodate competing interests, the Commission’s role has been seriously impacted by past legislation and by subsequent interpretations of the law by the courts.

Indeed, the current law enables various agencies to impose on licensees huge unfunded conditions—such as costly waterfowl or fish mitigation or enhancement measures—with little or no balancing, as contemplated by the Federal Power Act.

This is not to dismiss the importance of the oversight these agencies provide. Public attitudes toward hydropower have changed and, quite properly, raised environmental considerations to a higher level than when many of the nation’s hydro projects were first licensed decades ago.

The problem is the excessive focus on any one area, to the exclusion of all else, that can result in unnecessary licensing delays and expenditures and can even lead to mandates to curtail hydro production.

Some two-thirds of all hydro projects relicensed since 1986 actually lost generation as a result of relicensing. The U.S. Energy Information Administration’s "Annual Energy Outlook 2000" projects that hydro generation will decline through 2020 "as regulatory actions limit capacity at existing sites."

I should note that this is occurring even as the Power Authority and others are implementing alternatives to the traditional licensing procedure.

At St. Lawrence, under a cooperative consultation process, we’ve worked with the community and other interested parties to reach agreement on various issues before submitting the application. This process has been beneficial in some respects, but has not been a panacea—a number of matters remain unresolved.

At Niagara, we’re considering various approaches that would allow meaningful public participation.

Meanwhile, the consensus among various experts, including FERC commissioners and staff, is that the commission has taken licensing reform about as far as it can go administratively under current statutes, and that a legislative fix is sorely needed.

The Power Authority strongly urges you to join us in supporting legislative reform of the hydro relicensing process. After all, our ability to relicense our projects in a cost-effective manner, without a reduction in generation, is as important to you as it is to us because it will directly affect how much power is available and how much you pay for it.

Several bills have been introduced in Congress, and are working their way through the legislative process. Some of these bills, however, do not get the job done in their current form. We’re now working with others to forge more effective legislation.

In particular, we’re supporting legislation co-sponsored by New York Congressman Edolphus Towns, who has been a major force for hydro relicensing reform even though his district—oddly enough—is in Brooklyn. Please ask your Congressmen to back the Towns bill.

While reform is desperately needed, the industry and consumers alike can ill afford the wrong type of reform—which might further limit FERC’s ability to truly balance hydropower and environmental objectives on the nation’s waterways.

To those in public power—in New York State and across the nation—I say, let’s work to reform the long and costly ordeal of hydro relicensing—and make sure we do it right.

The path I describe is one of mutual interest. That’s what originally brought us together when the Power Authority built the great projects on the St. Lawrence and Niagara Rivers. And that’s what binds us together today as we face the challenge of relicensing and the other demands of our changing industry.

Thank you.

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