Executive Speeches

Remarks of Eugene W. Zeltmann, president & chief operating officer of the New York Power Authority, to the Schenectady Rotary Club, Schenectady, New York.

September 6, 2001

Good afternoon. It’s great to be back at the Rotary Club.

It was just about 17 months ago that I last spoke to you—and I was telling my wife how pleased I was to be invited again. But she said, "Don’t get too excited, Gene, they’re just giving you a second chance."

In any case, it’s almost mind-boggling to think about all that’s happened in our business in the relatively brief period since that last talk. So I appreciate this opportunity to update you and to touch on some of what the New York Power Authority is doing to help ease the transition to a competitive electricity industry in our state and to stave off the kind of power-supply and price crisis that hit California earlier this year.

Interestingly enough, the Chinese word for "crisis" is composed of two characters, one meaning "danger" and the other, "opportunity."

In California, despite an easing of the supply crunch this summer—thanks mainly to mild weather and expanded energy conservation efforts—the focus has been a lot more on the "danger" side of the picture.

But I think the crisis in California has provided a real opportunity for those of us in New York and other states to learn from what’s happened there and avoid the same mistakes. In fact—as I’ll try to show a little later on—there’ve been some encouraging signs in New York that the lessons have been taken to heart.

Without question, the biggest single challenge facing our industry as it moves into the new age of deregulation is to make sure that we have enough electricity to sustain and drive economic growth and to enable consumers to reap the full benefits of competition.

The rapid increase in demand for power over the past few years has reflected the needs of an expanding economy—and, most dramatically, the pervasive use of computers and other electronic devices.

New York State is by no means insulated from the power crunch. More than 821,000 jobs have been added to the state’s economy since Governor Pataki took office. And job growth like that—however welcome—translates into new demands for electricity.

I’m confident that given New York’s current actions and policies, the twin goals of competition—reliable supplies and lower prices for consumers—will be progressively realized over the next several years.

I can tell you that the New York Power Authority is working on a number of fronts to help facilitate the state’s transition from a regulated power industry to a competitive one.

For example, the low-cost electricity that the Power Authority supplies under Governor Pataki’s highly successful Power for Jobs program and other initiatives helps to support nearly 420,000 jobs throughout the state.

About 18,400 of those jobs are right here in the Capital District at employers ranging from Power Palet and MVP in Schenectady to Codino’s Italian Foods in Scotia and Albany Molecular Research.

Another way we’re helping to keep electricity prices in check—and assure an adequate supply—is by aggressively promoting energy efficiency and alternative power sources.

We’re investing more than $100 million this year in projects using energy-efficient technologies and clean, new energy sources. That’s more than 2 ½ times the figure for 1994—the year before Governor Pataki took office.

This year’s projects are in addition to those we’ve already completed—including the $20 million worth of energy-efficient lighting, motors and other features we’ve installed at Capital District facilities such as Schenectady City Hall, the Scotia-Glenville Schools, Empire State Plaza, Albany International Airport and the University at Albany.

Overall, facilities in this area—and the taxpayers—save more than $3 million a year thanks to these efforts, which also benefit the environment by cutting power plant emissions.

The Power Authority is also a national leader in demonstrating renewable sources of electricity, such as solar energy and fuel cells.

One of our rooftop solar projects isn’t too far from here—up in Amsterdam. And we’re investing about three point six million dollars in a project to harness the waste methane at the Town of Colonie’s landfill to produce electricity. The 25-hundred kilowatt plant will provide power for the Mohawk Paper facility in Cohoes. We hope to have it in service by the end of next year.

Extensive though they’ve been, Governor Pataki has brought new impetus to our energy-efficiency and renewable energy programs. He recently issued an Executive Order requiring that state agencies obtain at least 10 percent of their electricity from renewable sources by 2005 and 20 percent by 2010. These might well be the nation’s most ambitious targets. The order also calls for major energy-efficiency improvements in state buildings.

The Governor’s order has a double meaning for the Power Authority. As a part of state government, we’re subject to its requirements. And, as the state’s utility, we expect to have a key role in helping other public entities meet those requirements.

Governor Pataki quickly followed up on his Executive Order by proposing legislation to help schools and state and local government agencies use our established procedures and those of the New York State Energy Research and Development Authority to secure the cleanest, most-efficient energy technologies. We hope the Legislature will pass that bill—which offers an extremely promising approach.

But—vital as energy efficiency is—it’s just one element in a three-part strategy to assure adequate power supplies and affordable prices. In New York—and throughout the country—we must also strengthen transmission systems and build environmentally clean power plants as quickly as possible.

Competition is already putting additional demands on overburdened transmission networks as new suppliers seek to get electricity to their customers. But because of extensive regulations and inevitable local concerns, it’s very difficult to build new transmission lines.

The most desirable course—if feasible—is to transport more power on the lines we already have. And the Power Authority is carrying out a pioneering project to do just that.

At our Marcy Substation near Utica, we’re investing $35 million in a first-of-its-kind device called a convertible static compensator—or CSC—that we developed in cooperation with EPRI, the electricity industry’s research arm.

The CSC will use high-speed electronics to control electricity flow and permit instant transfers from heavily loaded lines to those with spare capacity.

We recently completed the project’s first phase—which has strengthened voltage support and boosted capacity on the heavily congested transmission path between Utica and Albany, as well as in the statewide system.

When the CSC is fully operational next summer, it will also permit operators to simultaneously control power flows on two lines. It’s this capability that will make the CSC the most advanced transmission control device in the world.

As for the third piece of the power-supply and price equation, it’s clear that New York State must act to assure that new, environmentally clean power plants are built as quickly as possible—as we are now operating right at the margin.

Summer may soon be a distant memory, but it was less than a month ago—during an August heat wave—that New York set statewide records for electricity demand on three consecutive days. The new peak, close to 31,000 megawatts, came within about six percent of the available generating capacity. That was a very close call—but it was by no means a surprise.

In a report back in March, the Independent System Operator—which runs the state’s transmission system and wholesale power markets—had called for the approval of 4,000 to 5,000 megawatts of new generating capacity in the state this year and the installation of 8,600 megawatts by 2005.

The report said the new power plants are needed not only to keep the lights on, but also to assure a robust competitive market and lower prices for consumers. In fact, the ISO forecast that if the recommended capacity were added by 2005, statewide electricity prices would be at least 20 to 25 percent lower than if no new plants were built.

About 20 proposed new or expanded power plants—all to be fueled by natural gas—are now in various phases of the regulatory process in New York, and four have been approved. The most recent approvals have come within the past nine days—one only yesterday—for expansions at two existing plants in New York City.

The list of proposed additions includes two new Capital District facilities—the 520-megawatt plant in the nearby Scotia-Glenville Industrial Park and a 510-megawatt unit in Rensselaer—as well as a 350-megawatt repowering project at the Albany Steam Station in Bethlehem. But it’s unlikely that these or any of the other proposed new projects will be completed before 2003.

Clearly, it’s vital that we continue to move ahead—in New York and elsewhere—to get these and other new power plants in service. As this summer dramatically demonstrated, we can’t become complacent.

I was intrigued—and concerned—by a story in The New York Times two weeks ago reporting that prospective plant developers in some other parts of the country are dropping their plans because of falling electricity prices and apparent supply surpluses.

This, I believe, is a serious miscalculation based on temporary conditions that aren’t likely to last very long. It’s analogous to when Ford Motor Company, in the mid-seventies, cut back production of small cars in the false belief that gas lines were over after the energy crisis of 1973-74.

In 1979, there was a second energy crisis and Ford lost significant market share to importers of small foreign cars. The consequences of failure to prepare for a potential crisis sparked by a shortage of electricity would obviously be far greater.

As I’ve indicated, New York State is well aware of the future needs and is acting to meet them. And nowhere has the response been more immediate and dramatic than in New York City.

Just about a year ago at this time, the city was looking at the very real prospect of blackouts and price spikes for the peak air-conditioning season in the summer of 2001. Quick action was obviously required. And New York State turned to its Power Authority.

In what I think was a truly extraordinary effort, we obtained, installed and started up 10 small, clean General Electric gas-turbine generators in various parts of the city—and another GE unit on Long Island.

This was a job that generally would take up to two years or more. But we knew we had to be ready for this summer—and we pulled out all the stops to meet the deadline.

All the units were operating by the time the August heat wave hit. They provided about 400 critical megawatts in the city and 44 on Long Island.

Public and utility industry officials hailed the effort. So did newspaper editorials. Bill Museler, head of the ISO, said in a New York Post column that the gas turbines made "a huge difference." And I was personally very pleased to receive a letter from Maureen Helmer, the Public Service Commission chairman, in which she said that the new generators "turned out to be crucial."

While the gas turbines are intended to help avert supply problems and high prices in New York City and on Long Island, it’s important to recognize that the state’s power system is interconnected. So any measures that bolster the system in one place can potentially benefit other areas.

The installation of the gas turbines, like the CSC project and our energy-efficiency initiatives, is in keeping with the Power Authority’s long tradition of meeting New York State’s most pressing energy needs—and doing so with utmost respect and concern for the environment.

That environmental commitment is also evident in our leadership in promoting electric transportation, an industry in which Schenectady played an early role. As a GE alumnus, I was particularly interested to learn that Charles Steinmetz—a prominent figure in our industry’s development—had designed prototypes of several electric vehicles, including delivery trucks, when he was working here at the company.

This led to establishment of the Steinmetz Electric Motor Car Company—which was later moved to Brooklyn, where it produced an industrial truck and a lightweight delivery car. Steinmetz planned for the company to turn out 1,000 trucks and 300 cars annually, but that was cut short by his death in 1923.

You might say the Power Authority has picked up where Steinmetz left off.

We’ve put—or helped to put—more than 200 electric or hybrid-electric vehicles on the road at the Power Authority or in our customers’ fleets.

Those vehicles now include 11 hybrid-electric buses in New York City—for which the concept was developed at GE in Schenectady. The last time I talked to you, that number was five. So we’re making progress.

These buses aren’t just good for the air. They also offer a smooth ride as they were designed with a suspension system and chasis durable enough for the city streets.

Meanwhile, we’re continuing to work with GE in Schenectady on hybrid buses that will be still cleaner and more efficient.

We’ve also helped to demonstrate and place in operation several two-ton electric postal delivery trucks. The U.S. Postal Service has purchased 20 of these vehicles, with support from the state and the Power Authority. Eight have already been delivered and are on the road.

The trucks were assembled at Super Steel in Schenectady, which also manufactured several electric school buses that we’re demonstrating in New York City for the Board of Education.

It’s clear, then, that Schenectady is playing a key role in the Power Authority’s electric transportation program. And equally clear that electric transportation is one of a number of areas in which the Power Authority is proving a unique asset to New York as the state’s power industry heads further into the competitive era.

We celebrated our 70th anniversary this past April, but that was just a momentary look back. Our usual focus is on the new challenges that lie ahead.

It is, of course, impossible to predict just what all those challenges will be. But at times of potential crisis, I can assure you that the New York Power Authority will be ready to help defuse the dangers and to create and capitalize on the opportunities.

Thanks very much.

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