Executive Speeches

Remarks of Louis P. Ciminelli, chairman of the New York Power Authority, at the Multiple Intervenors Annual Meeting, Syracuse, New York.

October 4, 2002

The last few years have been a time of dramatic change in the electric power industry in New York and many other parts of the country as the industry has experienced deregulation and the transition to competition.  

But for all the changes, it remains an operating principle at the New York Power Authority that everything begins and ends with our customers.

Luckily, in New York State, we have a Governor who has a similar attitude toward business.  Governor Pataki’s policies have helped to create a business-friendly environment in a state where it had been sorely lacking.  As a businessman myself, let me tell you—I see the difference.

New York’s economy was hit hard by the devastating attacks of September 11th and by the overall economic downturn, but the Empire State is showing its resilience.

In New York City, there are already signs that the economy is improving after an extremely difficult year.  Upstate and the suburbs are actually doing better than the national average in private employment trends.  And what a change that is from the recession of the early nineties—when upstate job losses were three times the national rate and the economic slump lasted three times longer than the nation’s.

We all know that there is still a lot of work to do to further strengthen New York’s economy, but I think we’d be looking at a far bleaker situation if not for the solid foundation Governor Pataki has established … and the policies he’s continued to pursue.

It’s become very clear that Governor Pataki’s policies are paying off—and the word is getting out. For example, the March 2002 issue of Site Selection magazine reported that New York State now ranks 3rd in the nation in attracting new and expanded corporate facilities. That’s the State's strongest ranking ever and a step above last year's 4th place finish. In 2001 New York attracted 988 expansion projects, compared with only 75 back in 1994 when the State ranked a disappointing 20th in the nation.

The Governor is also working hard to make New York an incubator for the jobs and industries of the future.  Centers of Excellence across the state are bringing university, industry and government resources together to put the Empire State on the cutting edge of advanced technologies.

I’m happy to note that the Power Authority is directly involved in another of Governor Pataki’s efforts to position New York to attract critical new industries.

Recently, we announced that we will be working directly with the Development Authority of the North Country to expand a high-tech fiber optic network that will strengthen telecommunications and promote economic growth and private-sector investment in Northern New York.

The 400-mile system will be owned and managed by the Development Authority—which will lease space to private telecommunications carriers.  It’s a great example of cooperation between government and the private sector and—as Governor Pataki said about the project—a big move toward bridging “the digital divide” between Northern New York and the world marketplace.

As you know, the Power Authority’s more-typical role in boosting New York’s economy is to supply low-cost electricity to businesses that commit to create or protect jobs.

Under Governor Pataki, the number of jobs supported by our electricity has more than doubled.  It stands today at about 420,000—compared with 170,000 in 1994.

The biggest gains have come through the Power for Jobs program. This summer, Governor Pataki signed legislation to enable customers with expiring contracts to continue to receive Power for Jobs electricity through 2005.  The new law created a 183-megawatt “Phase Five” of Power for Jobs.  While reallocations are the first priority of the extension, any remaining power will be available for new applicants.

The new legislation provides for the Power Authority to keep purchasing the electricity for Power for Jobs on a wholesale basis from private suppliers.  But—for the first time—customers with extended or initial allocations will have the option to sign up with a retail supplier of their choice. The intent is to further promote the transition to a competitive marketplace for electricity in New York State.

As many of you know, the FitzPatrick Nuclear Plant near Oswego provides a good share of the electricity for Power for Jobs and essentially all of it for several other Power Authority economic-development programs.

We’re now obtaining that electricity from Entergy—which bought the FitzPatrick plant from us in November of 2000.  Our power-purchase agreement calls for our FitzPatrick supply to drop off sharply at the end of 2003 and to stop when the contract expires a year later.  But our customers in this room—and beyond—needn’t worry.

We’ve concluded an agreement with Constellation Power Source to provide enough electricity to meet our needs from the end of 2004 through 2007—when our long-term price commitments to many of our business customers run out.

Meanwhile, the hydroelectric power from our Niagara and St. Lawrence-FDR projects remains a vital force for job creation and retention in the Western and Northern parts of the state.

Early this summer, Governor Pataki announced that nearly 550 new jobs would come to Western New York following a major national marketing effort for 17 megawatts of power that had become available from the Niagara Project.

Overall, Niagara power helps to support about 50,000 jobs at Western New York businesses—including some of your members.

I should note too that Alcoa and General Motors Powertrain—both M.I. members—receive about 60 percent of the St. Lawrence Project’s output—protecting more than 2,100 North Country jobs.

The challenge of responding to the economic devastation resulting from the destruction of the World Trade Center presented the Power Authority with its newest opportunity to protect jobs with economical electricity. The Power Authority had been supplying 80 megawatts to the World Trade Center.  As part of economic recovery legislation approved last fall, the Authority was authorized to use electricity that once powered the World Trade Center to help retain jobs in Lower Manhattan.  By mid-August, we had allocated the full 80 megawatts to former Trade Center tenants and other New York City businesses affected by the tragedy.  That power is linked to some 43,000 jobs.

I know I’m preaching to the choir when I say that low-cost electricity is a powerful impetus to economic growth.  The value of low-cost electricity, however, also lies in the other benefits it makes possible.  Consider, for example, the aluminum industry.

In 1827, the German chemist Friedrich Wohler isolated an element called aluminum from some feldspar.  It was an incredible find.

The silver white metal was ductile and malleable.  It conducted heat and electricity.  It was lightweight and resisted corrosion.  It was really a super-material.  What’s more, it was abundant.

But it was extremely costly to produce aluminum by chemically removing it from feldspar and other minerals in which it occurred naturally.  So costly, in fact, that until the 1880s, it was something of a precious metal and was used only rarely in industrial applications.  But everything changed when scientists found an electricity-based extraction method.

When engineers turned to low-cost power to produce aluminum, the price of the metal fell so much that people could even wrap sandwiches with it.  That set the stage for the eventual use of aluminum and its compounds in paints, jewelry, high-tension power lines and aircraft production.

My point here is that economical electricity isn’t simply a fuel, but is often a key element in the fabrication process.  I view it as a strategic resource—similar to the silicon in semiconductors or the rarefied glass in optical fiber.

However, there isn’t much low-cost power to go around.  And, in New York and other parts of the country, we face a big challenge in assuring not only that enough electricity is available at affordable prices—but that enough is available at all.

Certainly, this past summer should have dispelled any notions that we were looking at a supply surplus in New York.

The state came close to a peak demand record—and missed it only because of aggressive conservation measures.

Looking ahead, the New York Independent System Operator—which runs the state’s transmission system and wholesale power markets—says 7,100 megawatts of new generating capacity will be needed by 2005—not only to keep the lights on, but to bolster competition and to permit the retirement of older, inefficient plants that are less friendly to the environment.  Others—including the Business Council of New York State—have issued similar forecasts.

Clearly, new power plants need to be built in New York … and that generation must come on-line as quickly as possible.

To this end, Governor Pataki has proposed legislation to re-authorize Article Ten of the Public Service Law—covering the siting of major generating facilities.  The Governor’s bill streamlines and expedites the review process while allowing for extensive public participation.  Its adoption should be among the first orders of business if the Legislature returns this year.

A total of eight projects, which could add about 4,700 megawatts to the state’s electric system, have been approved under the current Article Ten.  Others are in various phases of the regulatory process.  But several approved or proposed projects have been delayed or canceled.

The latest plant to win approval is a 500-megawatt natural-gas-fueled project that the Power Authority will build on the site of our Charles Poletti Project in Queens.  The new plant will use combined-cycle technology and will be one of the cleanest and most efficient power plants in New York City’s history.  We hope to have it up and running by early 2005.

Just last month, Governor Pataki announced a historic agreement among the Power Authority, environmental groups and Queens officials to close the 25-year-old Poletti Project in 2008 and pave the way for construction of the new plant.

The agreement demonstrates that we can both protect our environment and provide urgently needed new supplies of electricity.

Another key element in meeting growing electricity needs is to strengthen our transmission system.  It’s very tough to get a new transmission line approved and built—probably even more so than with a power plant.  One solution is to make better use of existing lines.

I know some of you have heard before about a pioneering project that does just that—the Power Authority’s convertible static compensator at our Marcy Substation near Utica.  To give you a quick update, the CSC has increased capacity on the current transmission system by nearly 200 megawatts by boosting voltage support.

When it’s completed next year, it will also enable us to instantly move electricity from heavily loaded lines to those with open space.  At that point, the CSC will be the world’s most advanced transmission control device.

The Power Authority is also a leader in promoting energy efficiency and the development of clean, new energy technologies as part of our overall effort to assure a reliable, affordable power supply and cleaner air for New Yorkers.

This is in line with an executive order that Governor Pataki issued last year that sets ambitious targets for state agencies with respect to both energy conservation and reliance on renewable energy sources.

In fact, our annual investments in these areas have more than doubled since the Governor took office—and exceeded $100 million last year.

I should note that our energy-efficiency projects are self-financing with the Power Authority’s up-front investment paid over time by the customer’s energy savings.

As many of you know, we have also implemented an aggressive summer program to cut peak demand for electricity by our business and government customers.  NYPA has been running its Peak Load Management Program for the past few years, but this year it became part of the statewide Coordinated Energy Demand Reduction Initiative involving other state agencies and the New York ISO.  This summer, Power Authority customers combined to cut daily peak demand by nearly 450 megawatts—equivalent to the output of a good-sized power plant.

Meanwhile, we’re continuing and expanding programs to develop renewable sources such as fuel cells, rooftop solar facilities and power plants that run on landfill gases.  And we’re planning to obtain up to 50 megawatts of electricity from new or existing wind-power projects in New York State through competitive bidding.

The Power Authority has a long and proud renewable-energy heritage—going back to construction of our great hydroelectric projects on the Niagara and St. Lawrence rivers.

We’re now spending more than half a billion dollars on life extension and modernization programs at Niagara and St. Lawrence-FDR.  As a result, we’ll be able to keep these projects running at maximum efficiency—and keep providing our hydropower customers with economical electricity—for many years to come.

At Niagara, we’ve replaced nine of the 13 turbines at the main generating facility—the Robert Moses Niagara Power Plant.  We’re on schedule to complete the job in 2006.  And at St. Lawrence, we’re now replacing the second unit, with 14 more to go—a process that will continue until 2013.

The importance of this work has been driven home over the last few years by sharply lower Great Lakes water levels. As those of you who receive our hydropower well know, since late 1999, we’ve had to reduce your energy supplies during some months because of low flows.

Even with the reductions, our hydro projects—as I mentioned before—are powerful economic engines.  And, like our modernization programs, our efforts to obtain new federal licenses for the projects are among our very highest priorities at the Power Authority.

Almost a year ago, we applied for a new 50-year federal license for the St. Lawrence-FDR project—where the present license expires in 2003.

This followed a landmark agreement with local governments and school districts that includes a number of financial, environmental and recreational benefits for the area and has resulted in widespread support for the new license.

At Niagara—where the license expires in 2007—we’ll also apply for a 50-year renewal.  This past summer, we received federal approval for an alternative process which—as at St. Lawrence—will permit full public participation from the start.

Also as at St. Lawrence, the continued supply of low-cost power to area industries will be a key issue.  So I urge those of you who receive Niagara power to become involved to help us protect your interests.

The hydro projects were the reason the Power Authority came into existence.  That power became a major force for job protection and creation in Northern and Western New York.

Today, we’re building on that history by advancing Governor Pataki’s ambitious agenda to promote prosperity for all of New York State.

As its Chairman, I am pleased that the Power Authority is playing a significant role in energizing the economy of the Empire State.  And I am pleased that we have been working closely with the members of Multiple Intervenors in that effort.

I appreciate the opportunity to speak with you today. Thank you very much for listening.

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