Executive Speeches

Remarks of Eugene W. Zeltmann, president & chief operating officer of the New York Power Authority, at the First Reformed Church of Schenectady, Schenectady, New York.

November 7, 2001

Good afternoon. It’s great to be back with you.

I particularly welcome this opportunity to talk to you about the New York Power Authority’s vital role as the state moves toward a deregulated, competitive power industry.

Of course, one of the purposes of a competitive industry is to give consumers a choice among power providers. In light of that—and the fact that we’re in church—I’m reminded of the story of the business executive who died and also was given a choice—of going to heaven or to hell. The process began with tours of both places.

Heaven was great—everything you’d expect. But the surprise was that hell was even better—swimming pools, golf courses, champagne. The devil couldn’t have been more charming. So the executive went to some neutral ground, picked up his belongings and returned to hell for the duration.

This time when he arrived, he was greeted by a blast of hot air. He peered into a huge fiery cavern where perspiring workers struggled to stoke furnaces.

"What’s going on here?" he asked the devil. "This is nothing like what you showed me yesterday."

"Ah," said the devil, "yesterday you were a prospect. Today you’re a customer."

It’s still almost impossible to comprehend, but nearly two months ago, a hell of a different—and very real—kind befell New York City and our nation. And the horrific terrorist assaults that brought down the twin towers of the World Trade Center have spread heartbreak and pain far beyond the area that we now call "ground zero."

For the Power Authority, the attack had intensely personal overtones.

We had supplied about 80 megawatts of electricity to the Port Authority of New York and New Jersey—one of our largest customers—for use at the trade center. We’d also helped the Port Authority conserve energy at the Trade Center with energy-efficient lighting and motors. And we knew people who were killed in the attack.

Here’s a graph showing the amount of electricity we were providing to the Trade Center on Monday, September 10—a perfectly normal day. It starts off at about 40 megawatts, comes up to about 80 in mid-morning, then starts falling in the evening.

Here’s the next day—September 11. It begins just about the same—perfectly normal. Climbs up. Then falls sharply around 9 a.m.—and goes to zero. Very stark. And very poignant.

Now, Governor Pataki has directed us to reallocate that 80 megawatts for use principally by businesses that had been housed in the Trade Center and are relocating to nearby areas of New York City. This approach has been included in legislation passed about two weeks ago. The low-cost power could save these businesses more than $6 million a year and help to spur the city’s economic recovery.

The events of September 11 have frequently been compared to Pearl Harbor and have given us all a hint of what Americans must have been thinking and experiencing at that time.

Since I was very young, I only faintly recall the fear of homefront terrorism that was prevalent during World War Two. But I recently learned of an interesting twist concerning Nazi submarines that surfaced during the war off the coasts of Florida and Long Island.

Two teams of saboteurs—roughly half the number of men that hijacked the planes on September 11—came ashore. As it happens, one of their targets was the Schoellkopf hydroelectric power plant in Niagara Falls—a facility that produced large amounts of electricity for war industries in Western New York.

Luckily, the Nazi plot was thwarted. But the Schoellkopf plant collapsed into the Niagara Gorge 14 years later—on its own.

This created a power crisis for the many businesses that depended on its low-cost electricity. And in direct response to that crisis, the Power Authority built the Niagara Power Project. That great project today produces some of the least expensive electricity in the United States—a portion of which flows to residential consumers here in the Capital District.

A reliable, affordable power supply is as critical today as it was during the war—or in 1956, when the Schoellkopf plant was destroyed. And, if anything, its importance has increased in the wake of September 11.

The national economic slowdown had begun to affect New York even before the terrorist attack. The state now confronts new and formidable challenges. But—thanks to Governor Pataki’s leadership—we enter this difficult period from a strong foundation.

In fact, New York State has gained some 800,000 private-sector jobs since the Governor took office.

That’s a direct result of his success in implementing the nation’s largest tax cuts. In slashing regulatory red tape. In spreading the word that New York is now business-friendly.

But job growth like we’ve enjoyed—however welcome—translates into new demands for electricity.

And—as this year’s California crisis vividly demonstrated—the biggest single requirement facing our industry as it moves into the new age of deregulation is to make sure that we have enough electricity to meet society’s needs and to sustain and drive economic growth.

Doing so, by the way, will be an excellent response to the terrorists. They may have struck at our financial heart—but it is electricity that is the lifeblood of our economy.

Here in New York, I’m confident that thanks to the state’s actions and policies under Governor Pataki, the twin goals of competition—reliable supplies and lower prices—will be progressively realized over the next several years.

And I can tell you that the 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.

Some of our most important efforts are directed at helping Governor Pataki to strengthen New York’s economy. Today, nearly 420,000 jobs throughout the state depend on low-cost Power Authority electricity. Close to 18,500 of those jobs are right here in the Capital District at employers ranging from Power Pallet and MVP in Schenectady to Codino’s Italian Foods in Scotia.

Many of our biggest successes have come through the Governor’s Power for Jobs program—which alone is tied to more than 300,000 jobs here and throughout the state. That’s a pretty remarkable figure when you consider that the outlook was for about 40,000 jobs when the program began back in 1997.

Power for Jobs is intended as a transition to help businesses and non-profit organizations cut their electricity costs until competition kicks in and lower rates prevail everywhere.

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

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 benefit the environment as well 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, to help wean the country away from its dependence on imported oil—a goal that’s more critical than ever in light of recent events.

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.

But—vital as the effort to promote energy efficiency and clean new technologies 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. Some of you may recall that I mentioned this briefly when I last talked to you—when the project was just getting started—but we’ve come a long way since then.

This past April, we completed the CSC’s first phase—which has strengthened voltage support and boosted capacity on the heavily congested transmission path between Utica and Albany, and in the statewide system.

When the CSC is fully operational—which we expect will be 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 equation, the need for new power plants pretty much speaks for itself.

Summer may already be a distant memory, but it was just three months 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 New York’s transmission system and wholesale power markets—had called for the installation of 8,600 megawatts of new generating capacity in the state by 2005.

The report said the new power plants are necessary 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. Four have been approved—two within the past two months—so we’re picking up momentum.

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 modernization project at the Albany Steam Station in Bethlehem.

As of now, it seems unlikely that these or any of the other proposed projects will be completed before 2003. But efforts are under way to speed the review of the Bethlehem initiative because of its environmental benefits. This could mark the first use of legislation that Governor Pataki signed in August to cut the review period from a year to six months for projects that will reduce pollution from older power sources by at least 75 percent.

It’s evident, then, that 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.

As the summer of 2001—and the peak air-conditioning season—approached, the city faced the serious prospect of blackouts or brownouts unless new generating capacity could somehow be added. Quick action was obviously required. And the state turned to its Power Authority.

Within about 10 months, 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—which was threatened by supply problems of its own. That’s a job that normally would take two years or more.

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.

These units proved their worth again after the terrorist attack when the ISO, as a security measure, ordered cutbacks in the flow of electricity on transmission lines into New York City and in the output of large power plants. The ISO told us to crank up the small, localized turbines—and they made a vital contribution.

While the gas turbines are intended to 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.

With that in mind, we’re working hard to assure the efficient operation of our Niagara project—and of our St. Lawrence-FDR hydroelectric facility—under Power Authority auspices for many years to come.

We’re carrying out major modernization programs at both projects. At St. Lawrence—which, like Niagara, is a source of low-cost power for Capital District residents—we recently concluded a landmark agreement supported by such diverse interests as state and local officials, government agencies, environmental groups and unions that we hope will ease the path to a new federal license when the current license expires in 2003. We applied for the new license just a week ago today—and are now preparing for the relicensing process at Niagara, where the current license runs through 2007.

Meanwhile, we’re embarked on yet another strategic initiative—which has a major focus right in your backyard. Just as we’re trying to cut dependence on foreign oil and clean the air with energy efficiency, fuel cells and solar panels, we’re also working to meet those essential goals with electric transportation.

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. And we’re continuing to work here with GE on hybrid buses that will be still cleaner and more efficient.

In another project with a local angle, the state and the Power Authority have helped the U.S. Postal Service purchase 20 two-ton electric postal delivery trucks that are being assembled at Super Steel in Schenectady. Thirteen of the trucks are already complete and on the road. And Super Steel also manufactured two electric school buses that we’re demonstrating in New York City.

So it’s clear that Schenectady is playing a key part 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 more typical focus is on the new challenges that lie ahead in this period of tremendous change for our industry.

It is, of course, impossible to predict just what those challenges will be or when and where they will arise. But I assure you that the Power Authority, true to its history and mission, will be more than ready to meet them—here in the Capital District and throughout the state.

Thanks very much.

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