Executive Speeches

Excerpts  from remarks of Eugene W. Zeltmann, president & chief operating officer of the New York Power Authority, to the Bronxville Rotary Club, Bronxville, New York

March 11, 2002

Good afternoon. I’m happy to have this chance to talk to you about developments in the rapidly changing electric power industry and, in particular, about the vital role the New York Power Authority is playing as we head toward a deregulated industry in New York State.

I think it’s especially fitting to be here in Bronxville, which was among the earliest communities to use hydropower for economic development. Falling water powered Lancaster Underhill’s wool carding factory, which also did yeoman’s duty as a gristmill and sawmill before the American Revolution.

Even today, Bronxville is taking advantage of its natural assets. A local real estate brochure describes the community as a series of "craggy hills and gentle valleys nestled in a curve of the Bronx River."

An inviting description to say the least, and the homes being advertised weren’t bad either.

As I guess most of you know, the Kennedy family once lived in Bronxville. And—as a testament to how the homes here retain their value—a long-time resident tried to convince me that Joe was able to get a second mortgage on his place to help pay for his son’s Presidential campaign.

I might even have believed him—but I knew the family had moved back to Massachusetts by then and that, in any case, Mr. Kennedy wouldn’t have needed the loan.

I take some pride in the fact that the Power Authority these days is contributing to prosperity in this and other parts of New York State by helping to assure a reliable, economical power supply.

There’s no question, though, that the state faces some tough economic challenges.

That’s due in part to the national economic slowdown—which thankfully is showing signs of turning around. And also, of course, to the tragic attack on the World Trade Center—which occurred exactly six months ago today.

I guess just about everyone has some sort of connection, or knows of one, to the September 11 tragedy—and the Power Authority is no exception.

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

We have a graph showing the pattern of electricity use 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 our low-cost power will save the businesses more than $6 million a year.

This, of course, is just one part of the state’s recovery effort. As I said, the challenges are formidable. But—thanks to Governor Pataki’s leadership—we’re able to move forward from a strong foundation.

The Governor has implemented the nation’s largest tax cuts. Slashed regulatory red tape. Spread 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.

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—with employers pledging to create or protect a specific number of jobs in return for allocations.

Nearly 22,000 of those jobs are here in Westchester County.

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

Among the Westchester recipients are businesses—large and small—like Reader’s Digest in Pleasantville, Coca-Cola Bottling in Hawthorne, Kraft Foods in Tarrytown and Baker’s Pride Oven in New Rochelle. Non-profit organizations like St. Joseph’s Medical Center in Yonkers also benefit.

At the moment, all power available through Power for Jobs is allocated under existing contracts. But just last week, Governor Pataki proposed legislation that would permit extension of the contracts that expire this year and next. The program has earned broad support, so we hope the legislation will be enacted soon.

In Westchester County, the Power Authority also supplies power for businesses under other programs—including allocations through the county utility agency. Last year, we doubled the amount of power available to the agency—it’s now 20,000 kilowatts—so there’s a great opportunity there to create or save more Westchester jobs.

We also provide low-cost electricity to the Westchester County government and to Bronxville and about 100 other municipalities, school and water districts and other government entities in the county for public purposes. That saves taxpayers about $30 million a year. Westchester commuters also benefit since our electricity powers the Metro-North trains.

I should also note that an agreement we reached with Westchester County in connection with our sale of the Indian Point 3 nuclear plant is providing about $3.4 million in rebates to the county and the local customers through 2004 while guaranteeing rates won’t go up in that period.

Another way we help to keep electricity prices in check—and assure adequate supplies—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.

Most of the projects are in public buildings, schools and other public facilities throughout the state—but we also try to set an example on our own. Last month, our trustees approved a $3.5 million investment in energy-efficiency improvements at our headquarters building in White Plains—which houses some 575 Power Authority employees and a number of tenants. The work features installation of a new chilling system, along with other improvements.

Locally, we’ve completed energy-efficiency measures at public schools in Bronxville, Eastchester and Tuckahoe that save them—and the taxpayers—more than $125,000 a year on their electric bills. The new fluorescent lighting is about 75 percent more efficient than the old fixtures. And the lighting is better too.

Other sites include various public facilities in Eastchester and Tuckahoe, such as the Town and Village halls.

Overall, Westchester facilities—and the taxpayers supporting them—save more than $6 1/2 million a year thanks to our efficiency efforts. And these projects also benefit the environment by cutting power plant emissions by nearly 53,000 tons annually.

The Power Authority is also working to assure adequate electricity supplies by investing in new transmission technology.

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 carry 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 completing work on a first-of-its-kind device called a convertible static compensator—or CSC. The $53 million project 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 project’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.

At that time, we expect the CSC will increase the existing transmission system’s capacity by 200 megawatts or more. This could be of particular benefit to Westchester County and other parts of the Hudson Valley since it will enable more power from the north and west to reach this part of the state.

Promoting energy efficiency and strengthening our transmission system are two elements of what I see as a three-part strategy to meet future electricity needs. As the third piece, it’s clear that we must approve and build clean new power plants as quickly as possible.

It’s sobering to remember that 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 now, 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. 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. Con Edison—which had a record peak of its own last year—is also forecasting essentially no growth.

But when the economy recovers—as it’s apparently beginning to do—electricity use will start shooting up again and keep on growing. We must use what could be a very brief respite to get ready.

Some 17 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. Six others have been approved—one just about 10 days ago—so we’re picking up some momentum.

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—to meet increased demand in the near future and also to improve air quality by replacing old, inefficient generation.

Again, a quick look back at last year can help put things in perspective with respect to power needs.

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 gas-turbine generators in various parts of the city, and another 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.

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—particularly those nearby.

Beyond this, if Con Edison’s power costs go up because of tight supplies, all of its customers—including those in Westchester—will share the pain. In fact, prices were down last summer from the previous year despite the record demand for power—and the gas turbines deserve some of the credit.

In addition to the turbines, we’re awaiting regulatory approval to build a 500-megawatt natural-gas-fueled plant at the site of our existing Charles Poletti Power Project in Queens. The new plant—which we hope to complete in 2004—will use what’s called "combined-cycle" technology and thus will be extremely efficient. It will let us run the existing plant less often—providing an overall reduction in emissions.

As the Power Authority looks to the future, we’re also heavily involved in demonstrating clean, renewable energy sources.

For example, 18 NYPA solar energy projects operate throughout the state—including nine in Westchester. The Tuckahoe Library and Community Center is home to one of those projects.

Next door in Yonkers, we’ve installed the world’s first commercial fuel cell power plant to run on gas that’s a byproduct of wastewater treatment.

In another effort to clean the air and cut dependence on foreign oil, 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. Some 40 of them are in Westchester.

Late last year, we launched the nation’s largest electric station-car program—the "NYPA/Th!nk Clean Commute." It builds on a successful program we’ve run for a number of years, using other electric cars, for IBM employees in Westchester.

The new program centers on Ford’s Th!nk city electric vehicle, a two-passenger car with a range of about 50 miles between recharging—ideal for distances typically traveled to and from train stations.

Ford’s leasing the vehicles to 100 Westchester and other area commuters for $199 a month. Participants will use charging equipment at the station lots, including those in Chappaqua and White Plains. And—in what I’m told is a matter of some importance—they’ll be assured a parking spot at their station.

Since—as I mentioned before—the Metro-North trains run on Power Authority electricity, we have here the makings of a clean all-electric commute.

Of course, the Th!nk vehicle can also serve other purposes—and we’ve provided the Town of Eastchester with one for its municipal fleet in the first use of that kind in New York State.

It’s clear, then, that Westchester County is playing a key part in the Power Authority’s electric transportation program. And equally clear that electric transportation is just one of a number of areas in which we’re helping to lead the way as the state heads further into the competitive era for electricity.

It is, of course, impossible to predict 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 Westchester County and throughout the state.

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