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.

February 24, 2002

Good morning.

It’s been some time since I last spoke at one of these Sunday sessions, so I welcome this opportunity to update you about the vital role the New York Power Authority is playing 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 just about five-and-a-half 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."

The Power Authority had supplied about 80 megawatts of electricity to the Port Authority of New York and New Jersey for use at the Trade Center.

Here’s a graph showing the pattern 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 by businesses—particularly former Trade Center tenants—located or planning to locate in nearby parts of Lower Manhattan. We anticipate that the low-cost power will save these businesses more than $6 million a year and help to spur the city’s economic recovery.

We’re working very hard to identify the eligible businesses, make them aware of the program and send out the applications—and we hope to have the power flowing soon.

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 World War Two—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’re able to move forward from a strong foundation.

That’s a direct result of the Governor’s 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.

Beyond this, we must continue to make sure that the state has enough electricity to sustain and drive economic growth as we work to come back stronger than ever from the terrorist attacks and the national downturn.

I can tell you that the Power Authority is moving 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 supplied under various programs.

A number of our biggest successes have come through the Governor’s Power for Jobs program—which alone is tied to about 300,000 jobs 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.

Capital District recipients—who have pledged to create or protect close to 19,000 jobs in return for Power for Jobs electricity—include such companies as Schenectady International, Power Pallet in Schenectady and Codino’s Italian Foods in Scotia. The list also includes non-profit organizations like St. Clare’s Hospital.

And just last month MVP Health Care dedicated its new $35 million headquarters in downtown Schenectady—thanks in part to a Power for Jobs allocation. When it was approved for the power a little less than two years ago, MVP promised to provide close to 700 jobs. Well, 850 people are now at work in the new building—so they’ve kept the promise and then some.

A number of Power for Jobs contracts expire this year—and Governor Pataki has called for their extension. That will require legislation—which we hope will be enacted as soon as possible so we don’t miss a beat.

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

The Power Authority invested more than $100 million last year in projects using energy-efficient technologies and clean, new energy sources—and we plan to do the same this year. The annual figure, by the way, is more than 2 1/2 times the total for 1994—the year before Governor Pataki took office.

This year’s projects will be 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, to help wean the country 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 the year.

But—vital as promoting 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 more than $39 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.

Last 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 device is fully operational—which we expect will be later this year—it will also permit operators to simultaneously control power flows on two lines. It’s this capability that will make the CSC the world’s most advanced transmission control device.

As for the third piece of the power-supply equation, you’d think the need to build clean new power plants would pretty much speak for itself. After all, at this time a year ago, California was still deep in a crisis marked by blackouts and soaring electricity prices.

And—as recently as last August—a heat wave pushed New York to 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—a very close call.

Yet—to show how quickly things can change in our business—the September 11 attacks and the economic slowdown have led, at least for the moment, to falling prices and easing of supply problems in New York and other parts of the country. These trends—along with shaken investor confidence following the Enron collapse—have prompted some prospective developers to reconsider or drop plans for new power plants.

This, I believe, is a serious miscalculation, based on temporary conditions that will again reverse as the economy rebounds. 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 economic consequences of failing to prepare for future electricity needs would obviously be far greater.

It’s true that the New York Independent System Operator—which runs the state’s transmission system and wholesale power markets—is predicting essentially no growth in statewide peak demand for this summer over last year’s record. But when the economy recovers—and it will—electricity use will undoubtedly start shooting up again and keep on growing. We must use what could be a very brief respite to get ready.

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. Five have been approved—three within the past six months—so we’re picking up some momentum.

The list of proposed additions includes two new Capital District facilities—the 520-megawatt plant in the nearby Scotia-Glenville Industrial Park—for which the final application went in late last month—and a 505-megawatt unit in Rensselaer. In addition, a modernization project at the Albany Steam Station in Bethlehem will benefit the environment by permitting the retirement of an older unit and will boost overall capacity by 350 megawatts.

As of now, it seems unlikely that these or any of the other proposed projects will be completed before next year. Some may not be built at all. But there can be no doubt that we need new power sources—without delay.

Again, a quick look back at last year can help put things in perspective.

As the summer of 2001—and the peak air-conditioning season—approached, New York City faced the serious prospect of blackouts or brownouts unless new generating capacity could somehow be added. Quick action was 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.

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

Recent New York Times articles have stated that installation of the gas turbines is a case in which "government has proven its worth" and that New York City’s stable supply outlook for this summer is due largely to the 400 extra megawatts provided by the "bureaucrats at the New York Power Authority." We don’t usually think of ourselves as bureaucrats—"enlightened public servants" has a nicer ring to it—but other than that, the comments were pretty gratifying.

I should also note that while the gas turbines are intended to avert supply problems and high prices in New York City and on Long Island, the state’s power system is, in fact, interconnected. So any measures that bolster the system in one place can potentially benefit other areas.

With that in mind, we’re working 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 investing a total of more than half a billion dollars in modernization programs at both projects. At St. Lawrence—which, like Niagara, supplies low-cost power for Capital District residents—we applied last fall for a new 50-year federal license to replace the existing license, which expires in 2003. And we’re preparing for the relicensing process at Niagara, where the 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 250 electric or hybrid-electric vehicles on the road at the Power Authority or in our customers’ fleets.

Those vehicles now include 10 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 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 its worth" as the state’s power industry heads further into the competitive era.

It is, of course, impossible to predict just what the challenges of the future 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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