Executive Speeches

Remarks of Eugene W. Zeltmann, president & chief executive officer of the New York Power Authority, at the Municipal Electric Utilities Association of New York State (MEUA) Annual Meeting, Alexandria Bay, New York

September 9, 2003

Thanks very much.  It’s great to see all of you again.

Just over 4 l/2 months ago, I had the chance to speak at your semiannual meeting in Syracuse. That was a truly memorable night as we unveiled a landmark agreement between the MEUA and the Power Authority. I was extremely gratified and encouraged by your positive response to my remarks—and I want to thank you for it.

Tonight, I’m equally heartened by the “Three Rs” theme for this meeting.

Bob Mullane has told me that “Re-enforcing” applies to our strengthened relationship that has resulted from the agreement and the prospect that it will grow stronger still. “Relicensing,” I suspect, has something to do with the Niagara Power Project. And I understand that “Re-dedicating” points to a renewed—and vital—commitment to energy efficiency.

I think it’s significant that each element of your theme assumes—and depends on—ongoing and expanded cooperation between our organizations.

And I’m convinced that— working together—we now have an extraordinary opportunity to achieve a series of vital energy, economic and environmental goals.

With the strong support of Governor Pataki and our chairman—Lou Ciminelli—the Power Authority is committed to making the most of that opportunity.  I know you share this commitment.

Of course, a great deal has happened in—and to—our industry since that April night in Syracuse when all of us were last together.

The blackout of 2003 was—and will remain—a defining moment for everyone in our business. A moment like those in 1965 and 1977.

There were many who told us—before Thursday, August 14—that this couldn’t happen again.  Some who warned that it might happen again.  And none with definitive answers when it did happen again.

I spent all that Thursday night, and the next day, in the Power Authority’s Albany office—receiving and analyzing reports on the painstaking process of restoring over the course of many hours a power system that had largely shut down within seconds.

We quickly learned that the Power Authority’s Niagara and St. Lawrence-FDR hydroelectric projects were the only major power plants in the state that stayed on line when the blackout struck. In fact, they kept on operating at or near full capacity throughout the emergency.

In the early stages, they were supplying more than 60 percent of the electricity still flowing in the state—with much of the rest coming from Quebec on our 765-kilovolt transmission line.

Later, the two hydro projects—along with our Blenheim-Gilboa pumped storage project in Schoharie County—were the main electrical building blocks that enabled the statewide system to return to service.

In addition, the small power plants that we installed in New York City in 2001—and our Poletti project in Queens—played key roles in bringing the lights back on in the city. Four of the 10 small units were on line Thursday night and the others—along with Poletti—began operating at various times on Friday morning.

It was pretty frustrating for a while when erroneous reports attributed the blackout to a lightning strike at Niagara. Here we had this project doing yeoman service—with no lightning within hundreds of miles—and it was being singled out by public officials and the news media as the source of the problem.

Things were quieter at Massena. As I mentioned, the St. Lawrence-FDR project never went down—and because the project was so close at hand, the Massena municipal system’s territory was one of the first parts of the state to have service restored.

All of us in public power can take pride in the NYPA projects’ performance. But obviously the blackout has created some broader issues for our industry.

We must do all we can to determine how what apparently started as a relatively localized transmission problem in Ohio was transformed into a massive blackout affecting seven other states and the Province of Ontario. We must learn all we can from what went so terribly wrong. And we must use those lessons to take quick and effective corrective action.

Not surprisingly, much of the attention in Congress and elsewhere is focused on ways to strengthen the transmission system.  Now—more than ever—there is a clear need for the investment incentives, the cost-recovery mechanisms and the efficient regional planning processes that will enable us to build new transmission when and where it’s required.

We must also develop and implement technological breakthroughs—like the Power Authority’s convertible static compensator at Marcy—that will allow us to carry more power on the lines we already have. As many of you know, the CSC has increased statewide transmission capacity by nearly 200 megawatts through the use of high-speed electronic switches. When it’s completed later this year, it will be the world’s most advanced transmission control device.

But, important as transmission is, we also have to focus on the two other elements of what’s sometimes called the three-legged power-supply stool—clean new power plants and energy efficiency.

New power plants—strategically located—can reduce or even eliminate the need for new transmission.  That’s particularly true of distributed generation—installed at or near the load. In fact, when the lights went out in New York City last month, the Central Park Police Station was unaffected because it’s powered entirely by a 200-kilowatt Power Authority fuel cell.

As for energy efficiency, it’s evident that reducing the demands on the system by using less power can often help to stave off supply problems—though, ironically, heavy demand wasn’t a factor in the recent blackout. I’ll have more to say on the subject of energy efficiency a little later.

While specific responses to the blackout will emerge only over time, I think it’s safe to say that our industry is in for some profound changes—and that public power will have to be increasingly vigilant to assure that its interests are protected in Congress and other forums.

With that in mind, the agreement between the MEUA and NYPA is even more significant than it was last April. Our ability to speak clearly and candidly to each other and to cooperate in pursuing mutual objectives was important then. Now it’s absolutely critical.

The relicensing of the Niagara project is clearly the single most important issue facing our two organizations.

We’re making good progress in our alternative relicensing process—which provides for maximum participation by your association and the many others with an interest in this matter. The goal, of course, is to obtain a new 50-year federal license by the time the current one expires in August 2007.

Rick Chase—our staff member in charge of Niagara relicensing—will give you a detailed update tomorrow afternoon on where we stand. I urge you all to attend.

I just want to say tonight that Karl Lux and Kevin Brocks continue to diligently protect the interests of your organization and your individual systems in the relicensing process. That’s particularly true when it comes to proposals for expensive studies or projects of dubious merit that could affect your rates. So please keep informed of what’s happening and express your views to Karl and Kevin.

I also ask that you stay current on developments in Washington with respect to hydro relicensing.

Some of you may recall that back in April, the House passed a comprehensive energy bill that included the hydro relicensing provision that our organizations have supported over the past couple of years. It would require federal agencies to justify costly mandatory conditions for new licenses—and to consider reasonable alternatives.

The bill before the Senate included an identical provision. But just before it recessed in July, the Senate dropped that legislation and instead passed its energy bill from last year. This response to the mandatory-condition problem—while an improvement on the status quo—is not as effective as the House’s.

A Conference Committee will try to reconcile the conflicting bills, but there’s no telling what will happen, particularly if—as seems likely—other issues take priority as a result of the blackout.

We expect to receive a new St. Lawrence-FDR license when the current one expires in October, so that project won’t be affected. But it could be a different story at Niagara—the source of your hydro allocations. So please continue to back the House bill and let New York’s senators and representatives know where you stand.

Our agreement calls for the MEUA and your systems to “unequivocally support” our application for a new Niagara license on terms that will enable us to continue your allocations of low-cost preference power. We welcome—and need—that support.

Let me repeat what I told you in Syracuse: the Power Authority firmly believes that the Niagara Redevelopment Act—and its preference power provisions—should govern the new license.

That night in Syracuse was a time for talk about the promising path our agreement had opened for us. The weeks and months since have been a time for action to translate the words of the agreement into reality.

Shortly after your semiannual meeting, the Power Authority’s trustees approved one of the agreement’s major features—the preference power rate plan that runs through April 2007. As you know, your production charges for Niagara power will stay below one cent per kilowatt hour throughout that period. Also under the plan, your systems and our other preference customers have received a retroactive refund totaling about four-and-a-half million dollars for the time from December 2001 through this past April.

Three weeks ago today, as required by state law, we held a public hearing on another vital provision of the agreement—the proposed extensions of your Niagara contracts from 2013 through 2025. When the Authority’s trustees meet later this month, we’ll ask them to submit the extended contracts to Governor Pataki with a recommendation that he approve them.

The extensions, of course, will depend on a new license for Niagara on the terms I described before.

We’re also moving ahead with the parts of the agreement calling for us to join forces to strengthen our existing economic development program and to promote the use of clean electric-drive transportation by your systems.

An economic development committee made up of MEUA and rural cooperative representatives—along with NYPA staff members—has held one productive meeting and should be getting together again soon. The committee has discussed several promising ideas—including changes to the program that would encourage increased participation by small businesses and proposals to better promote the overall effort.

Of course, no changes will take effect without approval of the MEUA and your systems, as well as the Power Authority. But I do want to compliment the committee and particularly your representatives—MEUA President Jim Hamilton of Westfield, the aptly named Bob Greene of Greene, Mayor George Rivers of Rouses Point and Bruce Stevens of Richmondville on their efforts to date.

Our low-cost power gives your systems a tremendous advantage in attracting new businesses and jobs to your territories. Let’s put it to work to do just that.

With respect to electric-drive transportation, the Authority’s trustees at their meeting this past May authorized $1.2 million to finance purchases of electric and hybrid-electric vehicles by the state’s municipal systems and cooperatives. All of you should have received copies of individual system agreements and participant forms from the MEUA. We hope you’ll decide to take part—and thus help to clean the air and cut our dependence on foreign oil.

John Markowitz of our Electric Transportation staff will have more to say about this on Thursday morning—so that’s something else to mark on your calendars.

As we look at the agreement, it’s clear that we’re advancing on a number of fronts. However, I strongly believe that we can—and must—do more in one very important area. That’s the one calling for us to work together to carry out expanded energy efficiency and energy conservation programs in your service territories.

The fact is we have some successes to build on. Residential customers in more than 35 municipal and cooperative systems participated in the Watt Buster program—in which we carried out home energy audits and financed the installation of nearly $5 l/2 million in energy-saving measures.

The program concluded a number of years ago—but the benefits continue. Overall peak demand for electricity in participating systems has been cut by more than 15 megawatts and annual savings on electricity bills come to over $1 million. Also, Watt Buster projects have lowered annual emissions of greenhouse gases by about 19,000 tons, thanks to reduced reliance on fossil-fueled power plants.

I’m also pleased to note that in the years since Watt Buster, the MEUA has implemented its own energy-efficiency programs for member systems—with further benefits.

In addition, over the past three summers, NYPA has enabled municipal and cooperative residential customers—more than 4,400 in all—to take part in the Pataki Administration’s “Keep Cool” air conditioner exchange program.

And in another effort to save energy and protect the environment—while making your communities still more attractive—we’ve joined to plant more than 30,000 trees under our Tree Power program. NYPA, as you know, picks up half the cost for the planting. More than 1,100 trees were planted this season at a total cost of close to $50,000. And—I’m happy to announce—we will continue this very popular program next year.

But—for all this—your systems haven’t fully reaped the benefits of the Power Authority’s commitment and expertise when it comes to energy efficiency and clean new energy technologies. That’s ironic since you’re certainly among our most important and knowledgeable customers.

People sometimes say that you have no real incentive to save energy or consider clean new options because your hydropower is so inexpensive. I don’t buy that.

For one thing, every one of your systems now receives far more-expensive power from other sources to meet needs beyond your hydro allocations. As you well know, the incremental power kicks in only when you’ve used up your hydro.

So if you save energy, you’ll also be saving money. And with increasing concerns about the price and supply of natural gas—the main fuel for new power production these days—the savings could become still greater over time.

There’s also no question that the importance of conservation has been driven home by the low water flows that have required numerous cutbacks in your monthly hydro energy allocations over the past few years.

Water levels have shown some improvement—and we’re able to provide your full allocations this month.  But—as you’ve been advised—we expect a 3.5 percent shortfall for October, and cuts in at least some of the other months between now and next spring. We will, of course, keep you advised of the latest forecasts.

So, again, energy efficiency makes sense—in your system operations and for your customers. Give us your ideas—and tell us how we can help you “rededicate” yourselves to this essential objective. We have much to offer each other—in this and many other areas.

As we look to the future, it’s interesting to note the strong position of public power in our restructured electricity industry. It wasn’t too long ago that some were predicting we’d no longer be needed as competition brought lower rates throughout the country.          

Well, it hasn’t turned out that way. There’ve been plenty of upheavals in our business since the coming of deregulation—but public power has been a solid anchor in the storms. And—as the industry faces new challenges in the wake of the blackout—no one can any longer question our importance or relevance.

That’s especially true here in New York. Through our agreement and the promise it provides, our two organizations have created the foundation for a future of accomplishment, of innovation and of public service.

Our job is to build on that foundation and on the long tradition of public power in New York State. I have every confidence that we will.

Thank you very much.

As I mentioned a moment ago, public power has a rich tradition in this state.  It goes back to way before the Power Authority—and even the MEUA.

In fact, six of your members are celebrating their 100th anniversaries this year. Five of these systems are represented here tonight—so I’d like to call on officials from each to accept the plaques that I have to mark these milestones.

Gentlemen, please come forward:

—From Akron, Superintendent Bob Kowalik.

—From Boonville, Superintendent Kenn Stabb.

—From Castile, Superintendent Marvin Wilcox.

—From Rouses Point, Mayor George Rivers.

—And from Tupper Lake, Superintendent John Bouck.

I believe no one from Frankfort—the sixth system—is present, but we’ll be sure to get the plaque to the village as soon as we can.

Congratulations to each of tonight’s recipients—you have a lot to be proud of.  And thank you all very much.