Executive Speeches

Remarks of Joseph J. Seymour, chairman and chief executive officer, at the Multiple Intervenors Annual Meeting, Syracuse, New York.

October 11, 2001

Thank you, and good morning.

As someone who’s been heavily involved in economic development during much of the past three decades, I’m pleased to have the opportunity to speak to this group.

Just about half of the members of Multiple Intervenors are Power Authority customers, so I know they share many of our goals. And everyone in this room shares with us some truly extraordinary challenges.

It was exactly one month ago today that the unthinkable happened—a despicable terrorist attack on our nation, our state and the world’s greatest city. The horror and heartbreak of that September morning are still with us. But they are tempered by the steadfast determination of each of us, in our own way, to do our best to speed the recovery from the tragedy and to assure that America and New York emerge from it stronger than ever.

For the Power Authority and the members of Multiple Intervenors, that means the focus on economic growth and jobs must continue undiminished.

As President Bush said in his address to Congress last month, "Terrorists attacked a symbol of American prosperity—they did not touch its source. America is successful because of the hard work and creativity and enterprise of our people."

And to that I would add that nowhere are those qualities more evident than right here in New York State.

Now, we’re obviously going through some tough economic times, and New York is not immune to what’s happening nationally. But we’re in far better shape—in absolute terms and with respect to much of the rest of the country—than we were in the early 1990s, when a national recession had a disproportionate and devastating effect on New York.

The difference is clearly due to Governor Pataki’s success in implementing the nation’s largest tax cuts, cutting regulatory red tape and, in numerous other ways, driving home the message that this state is now open for business.

New York has gained more than 800,000 private-sector jobs since the Governor took office. And I’m proud to say that low-cost Power Authority electricity is a big part of his ongoing effort to create—and protect—jobs throughout the state.

Today, nearly 420,000 New York jobs depend on electricity that we supply under Governor Pataki’s Power for Jobs program as well as the Economic Development Power program, our hydroelectric allocations and other initiatives.

I should note here that the FitzPatrick nuclear plant, which we sold to Entergy Corporation last November, supplies electricity for Power for Jobs, the Economic Development program and some of the others.

The FitzPatrick allocations to Multiple Intervenors members and other business customers have been unaffected by the sale, since we’ll be purchasing at least part of the plant’s output from Entergy through the end of 2004. Looking beyond that, we’ve solicited supply proposals for up to 10 years from other sources, and we’ll eventually choose the option that’s best for our customers.

Power for Jobs, in particular, has been a real New York success story. When Governor Pataki signed legislation creating the program back in 1997, we expected that about 40,000 jobs would be protected or created over three years. Well, the total now stands at more than 300,000 jobs at some 700 businesses and non-profit organizations.

Legislation enacted last year has enabled us to extend the program for those whose allocations dated back to 1997 and 1998 and to bring in some new participants as well. But the 300 megawatts provided through the latest law are now fully allocated under three-year contracts and a further extension will require new legislation.

We’re working on this issue in Albany, and we’ll keep you posted as we progress.

Power for Jobs, you may recall, was designed as a transition to help businesses during the move to the lower prices promised by deregulation of the power industry in New York State. Thanks to the careful, deliberative process carried out by the Public Service Commission under Governor Pataki’s leadership, New York continues to move steadily into the competitive era—while avoiding serious reliability problems like those that have plagued California.

It’s clear, though, that the full benefits of competition—including lower prices—will be achieved only if we make sure we have enough electricity to meet our growing needs in the years ahead. And that requires a three-part strategy:

We must use energy more efficiently. We must strengthen our transmission system. And we must build new, environmentally clean power plants as quickly as possible.

The Power Authority is playing a key role in each of these areas.

At Governor Pataki’s direction, we’re investing more than $100 million this year in energy-efficiency programs and clean, new energy sources. That’s more than 2 l/2 times the figure for 1994—the year before the Governor took office. Just about two weeks ago, our trustees authorized additional funding of $250 million for future energy-efficiency projects at public facilities throughout the state.

But, valuable as it is, energy efficiency can take us only so far.

It’s also essential that we upgrade the transmission system as competition puts new demands on it.

Since it’s difficult to build new transmission lines, it makes sense to try to carry more power on the lines we already have. And that’s what the Power Authority is doing through a first-of-its-kind device we’re installing at our Marcy Substation, near Utica.

I believe some of you have heard about this convertible static compensator—or CSC. It will use high-speed electronics to control electricity flow on transmission lines. That will enable operators to instantly transfer power from heavily loaded lines to those with spare capacity— and to make better use of the existing system.

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 be done this coming summer. The CSC will then be the world’s most advanced transmission control device and will boost statewide transfer capability by 200 megawatts or more.

As for the third element of the equation, any lingering doubts that New York needs new power plants should have been dispelled by this past August’s heat wave. On three consecutive days, the state set records for power demand. The high—nearly 31,000 megawatts—was within a very tight six percent of the available capacity.

At the moment, about 20 new or expanded power plants are undergoing regulatory review in New York State, and four have been approved. Two of those approvals have come within just about the past six weeks, so the pace is quickening.

For all the planning for the future, New York City and Long Island faced the very real threat of California-style blackouts and brownouts unless new generating capacity could be added by this past summer. In a span of about 10 months, the Power Authority completed installation of 10 small, clean gas-turbine generators in the City and another on the Island—a multi-faceted job that normally would have taken two years or more.

Some said the gas turbines weren’t needed—that we were manufacturing a crisis.

But, let me tell you, when those temperatures soared in August—and the records for electricity use tumbled—the new generators were essential to keeping on the lights. Their vital contributio was cited by Mayor Giuliani, industry and regulatory officials and editorial writers.

An unanticipated—but very real—benefit came in the wake of last month’s terrorist attack.

To protect the power supply, the Independent System Operator—which runs the state’s transmission system—quickly implemented emergency "storm-watch" procedures. It ordered reduced flows on transmission lines into the city and cutbacks in the output of large power plants. We were told to make sure that the gas turbines were available. And they came through—producing a total of close to 230 megawatts at their peak and dramatically showing the strategic value of smaller, dispersed generation.

One final point concerning the attack—the Power Authority had supplied some 80 megawatts of electricity to the Port Authority of New York and New Jersey for use in the World Trade Center. Governor Pataki has now directed us to make this low-cost power available to businesses that were dislocated by the tragedy to help them resume operations in New York City. Our electricity would save these companies a total of more than $6 million a year and play a key role in the rebuilding effort.

While we’ve been devoting considerable attention to New York City in recent months, I can assure you that nothing is more important to the Power Authority—or central to our operations—than our Niagara and St. Lawrence hydroelectric projects.

These two great facilities provide some of the nation’s least-expensive electricity to businesses—including about one-quarter of Multiple Intervenors’ members. And we’re moving ahead with upgrade and modernization programs—at a total investment of more than half a billion dollars—with the goal of assuring that the projects operate at maximum efficiency far into the future.

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

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—which is the continuously available electricity that businesses require. But the upgrade will enable us to provide more energy at times of greatest demand by making more-efficient use of available water.

That’s especially critical these days as continuing low levels on the Great Lakes cut hydroelectric production.

As our customers who are here today well know, we’ve had to reduce hydro energy supplies in most months over the past two years—and we expect the cutbacks to continue for at least the next six months.

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

Looking to the future, no hydroelectric issue is more significant to the Power Authority—and the state—than the two projects’ relicensings.

At St. Lawrence, where the federal license expires in 2003, we will submit our application for a new license at the end of this month. The formal relicensing process hasn’t begun yet at Niagara—where the current license runs through 2007.

The most contentious issue at St. Lawrence involves efforts by some in the community to obtain what we view as unreasonable financial benefits from the Power Authority.

We take our obligations to our host communities very seriously, and have already made a number of commitments in connection with the St. Lawrence relicensing. But I think it’s important to re-emphasize a point that some of you have heard before—which is that we must strike a balance between appropriate local contributions and the need to maintain low rates for our hydroelectric customers. Because, ultimately, excessive demands on the Power Authority can be met only through rate increases.

I’ve been heartened that officials at Alcoa and General Motors in Massena, along with union leaders, have spoken out clearly on this subject and have left no doubt that future decisions on investments and jobs will be tied to a continued supply of low-cost St. Lawrence power. Business and labor leaders in Western New York have made similar statements about Niagara.

Let me be very clear: The terms and conditions of the St. Lawrence license could well affect what happens at Niagara. And what happens at each of these projects will profoundly affect the economic health of Northern and Western New York and of much of the state.

This, then, is a concern not just for those who receive our hydropower, but for all the members of this organization and for everyone here today. I urge you to keep a close eye on the relicensings 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.

Under current law, the Federal Energy Regulatory Commission is required—when issuing a new license—to balance power generation needs with environmental and other factors. However, various other agencies are able to impose on licensees huge unfunded conditions—such as costly waterfowl or fish mitigation or enhancement measures—with little or no balancing.

This can even lead to mandates to curtail hydro production as a condition of relicensing. In fact, some two-thirds of all hydro projects relicensed since 1986 actually lost generation. The U.S. Energy Information’s "Annual Energy Outlook 2000" projects that hydro generation will decline through 2020 "as regulatory actions limit capacity at existing sites."

And so I call on you to join the Power Authority and others in supporting legislative reform of the hydro relicensing process. All with an interest in New York’s economic well-being have a stake in this because our ability to relicense our projects in a cost-effective manner, and without a loss of generation, will directly affect how much power is available and at what price.

Although several bills have been introduced in Congress, some do not get the job done in their current form. We’re now working with other parties to forge more effective legislation.

In particular, we’ve backed a balanced approach that’s reflected in legislation introduced by New York Congressman Ed Towns, who’s been a major force for relicensing reform even though his district is in Brooklyn.

I’m extremely pleased that the state Municipal Electric Utilities Association recently came out in support of the Towns bill and of similar legislation introduced by Senator Larry Craig of Idaho. I ask all of you here today—individually and through this organization—to do the same and to write to your Congressman and New York’s two Senators to express your views.

Because of the scheduling disruptions caused by the terrorist attack, it seems unlikely that either house will take further action on relicensing during the current Congressional session. But a tough fight lies ahead, and we must keep working to reform the long, costly ordeal of hydro relicensing—and to make sure we do it right.

I hope you’ll be with us—for this truly is an issue requiring multiple intervention.

Hydro relicensing is just one area in which the Power Authority stands ready to join you to meet common objectives. If anything, cooperation across the widest possible front is even more important today than it was one month ago.

It may well be a long time before we’re back to business as usual. But we must get on with our usual business. And that is the business of maintaining and strengthening New York State’s economy, providing well-paying jobs for our people and enhancing the quality of life for all New York families.

This is a demanding—and worthy—mission. Together, I know we can fulfill it.

Thanks very much.

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