Executive Speeches

Testimony of Louis P. Ciminelli, chairman of the New York Power Authority, to the Assembly Standing Committee on Energy and the Assembly Standing Committee on Corporations, Authorities and Commissions, Albany, New York

March 16, 2005

Good morning Chairman Tonko, Chairman Brodsky and distinguished members of the Assembly.  My name is Louis P. Ciminelli and I serve as the Chairman of the New York Power Authority. I am accompanied by James H. Yates, who serves as Vice President of Major Account Marketing and Economic Development, and Joseph J. Carline, Assistant General Counsel.

I appreciate the opportunity to testify today on the issue of low-cost power and economic development in New York State.

The New York Power Authority owns and operates 21 generating facilities at 17 locations across New York State, with a total capacity of over 5.6 million kilowatts. It also owns and operates over 1,400 circuit miles of transmission lines and works to advance energy efficiency and the development of clean energy technologies. NYPA supplies electricity to government agencies, community-owned electric systems and rural electric cooperatives, private utilities and to private sector business and non-profit institutions in return for commitments to protect jobs.

The Power Authority, as a result of a series of federal and state laws enacted over the past several decades, provides economical electricity to a wide range of employers across the Empire State to promote job creation and retention.

NYPA is currently supplying 1,880 megawatts to 735 employers, ranging from heavy manufacturing and financial services to health care facilities and cultural institutions. Overall, those allocations of electricity are linked to more than 410,000 jobs.

According to the Public Policy Institute of the New York State Business Council, each job in New York State creates an average of $13,000 in annual state and local tax revenue.  Based on that estimate, the 410,000 jobs linked to NYPA power provide $5.3 billion in yearly state and local revenues.

Given the significance of the benefits resulting from these economic development power programs, the New York Power Authority welcomes your attention and we look forward to working with you to sustain and enhance the benefits that these programs provide to the people of New York State.

These programs use power generated by hydropower projects owned and operated by NYPA as well as power supplies purchased by NYPA from other power producers in New York State.

While the Power for Jobs program may be the most widely known of NYPA’s power programs for economic development, there are actually a number of separate and distinct programs administered by the Power Authority. The array includes:

• Replacement Power, which was established by federal law in 1957 to provide hydropower to industries in the Niagara Mohawk service territory within a 30-mile radius of the Niagara Power Project.

• Expansion Power, which was codified by state law in 1987 to provide hydropower to businesses within a 30-mile radius of the Niagara Power Project, including up to 20 MW that may be allocated to businesses in Chautauqua County.

• St. Lawrence-FDR power supplied to industries in Northern New York under provisions of the original Power Authority Act of 1931.

• The Industrial Economic Development program, which serves the 47 municipal electric systems and 4 rural electric cooperatives of New York State, who have agreed to make a portion of the hydropower authorized for their use available for economic development purposes in their communities. NYPA was authorized by federal law in 1957 to serve this group of customers.

• Power for Jobs, established in 1997 by state law to provide low-cost power to businesses and not-for-profit corporations that agree to retain or create jobs in New York State.

• Economic Development Power, enacted in state law in 1987, to provide low-cost power to businesses across the state.

• High Load Factor Power, enacted in 1968, provides power to energy-intensive manufacturers throughout the state.

• Municipal Development Agency Power, based on 1968 law, provides power for allocation by the New York City Public Utility Service Agency, the County of Westchester County Public Utility Service; the Nassau County Public Utility Service and the Suffolk County Public Utility Service.

• World Trade Center Economic Recovery Power, enacted in 2001 as part of omnibus economic stimulus legislation approved after the 9/11 terrorist attacks. That program authorized the use of electricity that once powered the World Trade Center to help rebuild the economy of New York City.

In order to provide you with a more complete picture of these programs, Jim Yates will present testimony when I conclude my opening remarks. However, before that presentation, I would like to highlight a few items.

First of all, I want you to know that NYPA is making major investments in the future of its hydroelectric generating facilities that provide renewable, emission-free electricity used to protect and create jobs in the Empire State.

The Power Authority has initiated a 15-year, $254-million Life Extension and Modernization program at St. Lawrence-FDR to replace the project’s 16 turbine-generators, which first produced power in 1958. The first of the new turbine-generators came into operation in 2002 under a schedule providing for three new installations every two years to minimize any power production losses. A $298-million modernization program has been ongoing at the Niagara Project to replace its 13 turbine-generators. That effort is scheduled to be completed by 2006.

In addition, NYPA successfully gained approval of the Federal Energy Regulatory Commission (FERC) for a new 50-year operating license for the St. Lawrence-FDR project in 2003. NYPA is now engaged in the process of relicensing the Niagara Project, with the use of a FERC-approved alternative licensing process providing for enhanced public participation. The license for that project expires in August 2007. In the relicensing efforts, NYPA has sought to balance the commitments to the environment and host communities with the costs of relicensing and its impact on the price of hydropower.

To enhance the process for allocation of hydropower under both the Replacement Power and Expansion Power programs, the New York Power Authority, Buffalo Niagara Enterprise, Niagara Mohawk, and Empire State Development Corporation, signed a memorandum of understanding in October 2003 creating a Western New York Advisory Group. As a result of the coordinated public-private effort in program implementation and marketing, Niagara hydropower is now available on a continuous basis and allocation decisions can be made promptly by the Power Authority’s trustees.

Using the new process, NYPA has allocated some 40 MW of low-cost Niagara hydropower to 25 companies with commitments to create more than 2,200 new jobs, retain more than 8,000 jobs and invest $557 million in Western New York. For example, in January of this year allocations were approved to assist American Pharmaceutical to create 50 new jobs and make capital investments of nearly $34 million in its two Grand Island facilities.

Just last week, the Buffalo News reported new Labor Department data which showed that the Buffalo Niagara region added 2,300 jobs last year, marking the region’s first full year of job growth since 2000. I don’t know exactly how many of those new jobs are linked to our hydropower allocations, but I’m certainly glad that we were able to make allocations on a timelier basis and contribute to region’s job growth in 2004.

As you know, several of the power programs administered by NYPA are facing expiration of their statutory authorization or other issues requiring legislative attention. The Power for Jobs program is scheduled to sunset at the end of 2005.  The Replacement Power program will lose its federal mandate at the end of 2005. Several NYPA power programs, linked in law to power supplied by the FitzPatrick Nuclear Power Project, provide economical electricity to businesses across the state. However, out-dated statutory language is preventing new allocations and renewal of long-term contracts for existing customers in those programs.

Our purpose here today is to provide you with data about how these programs have worked in order for you to make informed judgments about the future of the programs.  That’s why I have asked Jim Yates, who has hands-on experience with the administration of these programs, to provide you with a more detailed view. I believe many of you are familiar with Jim, who has presented testimony on the Power for Jobs program in the past.

On the issues regarding the technical aspects of program administration, we can offer you an abundance of information. However, many of the questions that need to be answered about the future of these programs are the not simple matters of administration; they are issues of law, requiring the judgment of lawmakers.

The New York Power Authority appreciates the opportunity to provide you with information you may need in order to make those judgments. Jim Yates has prepared detailed written testimony, which he will summarize in his presentation. With the completion of his presentation, we will be pleased to respond to your questions about NYPA’s economic development power programs.