Executive Speeches

Excerpts from remarks of Roger B. Kelley, president and chief executive officer of the New York Power Authority, at the Municipal Electric Utilities Association of New York State’s annual meeting, Lake George, New York.

September 18, 2007

Thank you and good evening.

I’m honored to be here as the latest in a long line of Power Authority leaders who have had the opportunity to speak to your association at your annual meeting.

Before coming to the Power Authority, I’d spent some 33 years in the electric utility industry—mostly in New York State.  So I already knew something about the key role played by the MEUA and your member systems.  That knowledge—and appreciation—have only grown during my time at the Authority.

As it happens, we have a mutual acquaintance.  Your attorney—Kevin Brocks—ably represented the Independent Power Producers of New York when I was that group’s chairman.  I’ve since discovered that he served the MEUA equally well in matters leading to your Global Settlement with the Power Authority in 2003 and to this year’s relicensing of the Niagara Power Project.  Kevin, it’s great to see you again.

I’ve learned quite a bit about the Global Settlement since my arrival at NYPA.

I know that it marked a critical turning point in the relationship between our organizations.

I believe that it has set us on the path to a bright future of cooperation in such vital areas as energy efficiency, electric transportation and economic development.

And I want to say—in no uncertain terms—that I am firmly committed to working with you to ensure the success of that relationship and to make that future as bright and productive as it can possibly be.

These goals are shared by Jim Pasquale and his team in the Authority’s municipal and cooperative group.

A major benefit of the Global Settlement, of course, was to secure your supplies of Niagara hydropower at cost-based rates under contracts that extend through 2025.

Thanks to the 15-year upgrade of the Niagara project that we completed on schedule last December, the overall allocation of firm power to the state’s municipal systems and rural cooperatives has increased by 12.8 megawatts—with the additional power distributed among the systems on a pro-rata basis in line with their contract demands.

A total of nearly 765 megawatts is now assigned to the New York municipal and cooperative systems.  In addition, you’re now receiving firm peaking power.  Others can—and do—covet your low-cost power, but your rights to it are inviolate under the contracts.

I’m delighted to report that the Power Authority’s new 50-year federal license for the Niagara project took effect at the start of this month.  I understand that your association was of great help both in supporting the new license and in bringing about the balanced settlement agreements that we’d sought from the beginning of the relicensing process. Thank you for your efforts.

The agreements ensure that the economic and environmental concerns of various parties will be met without excessive impact on the rates for you and our other hydropower customers.  As you know, the new preference power rates under the two-year plan the Authority’s trustees approved this past April are just over one cent per kilowatt hour—still among the lowest in the nation.  That’s a testament to what we view as a very successful and responsible approach to the relicensing.

The new license and the completion of the upgrade mark the start of a new era at the Niagara project.  Not only will the Power Authority retain responsibility for this magnificent public resource, but we will operate it at utmost efficiency for many years to come.  Since Niagara is your main power source, you will be among the principal beneficiaries.  

The fact is, though, that we ultimately depend on the water that’s available for power production.  With that in mind, the current outlook bears watching.

Water levels on the Great Lakes are below normal, and it may be necessary to curtail the supply of firm hydroelectric energy in some coming months.

As you’ve been advised, we anticipate a 5 percent reduction for this month and a 3 percent shortfall in October.  Some systems have arranged to have the Power Authority buy substitute energy for them in months when there are cutbacks, but the price inevitably is far above that for the hydropower.

On a related matter, the incremental supply agreements with the municipal systems and rural cooperatives that obtain all their electricity from the Authority run out at the end of this year.   Until now, we’ve shielded these full-requirements customers from market prices for the electricity we obtain to meet needs beyond their hydro allocations.  However—as we advised the customers almost three years ago—we will not be able to do so after the current contracts expire.

Twelve of the 14 full-requirements systems have nevertheless elected to continue obtaining their incremental supplies through NYPA.  We’re gratified by this vote of confidence and will be submitting the proposed new contracts for consideration by our trustees later this month.

The low water levels and the need by each of your systems for incremental power supplies—whether obtained through the Power Authority or others—underscore the importance of making your valuable hydropower go as far as possible before you have to rely on energy from considerably more expensive sources.

This brings me to the element of the Global Settlement that calls for our organizations to cooperate in promoting energy efficiency.

If anything, this has become an even greater priority since the settlement took effect, with increasing national concerns about energy supplies and prices and growing recognition of the threat of global warming.

In New York, Governor Spitzer has established the ambitious target of cutting the state’s energy use by 15 percent below the forecasted level by 2015.  The Power Authority is participating in a Public Service Commission proceeding to establish an energy efficiency portfolio that will make this “15 by 15” goal a reality.

We also look forward to working with you to expand your energy efficiency and clean energy initiatives—including those undertaken through the Independent Energy Efficiency Program.

I know the IEEP has produced a number of notable successes.  Now—as I assume you’re aware—your systems can also obtain financial and technical assistance through the Power Authority’s energy services program. This could give you additional low-cost financing options for projects carried out through the IEEP or on your own.

As an example of what can be accomplished, we recently joined with the municipal systems in Plattsburgh, Lake Placid and Tupper Lake to install nearly 625 highly efficient Energy Star refrigerators in public housing apartments in their service territories. These refrigerators use only about half as much electricity as previous models—so the three systems are conserving their hydropower and saving money. We hope those of you with public housing customers will follow their lead.

The Lake Placid and Tupper Lake efforts were part of the innovative Tri-Lakes Reliability Project.  We’re moving ahead with the villages and National Grid to build a 46-kilovolt power line and to encourage energy efficiency and the use of clean new electricity sources to help ease longstanding power delivery problems.  Right-of-way clearing began earlier this month for the line, which is scheduled for completion on time for the 2008-09 winter season.

Elsewhere, we recently completed an energy efficiency audit for Watkins Glen and are preparing to begin an audit in Sherrill.

Earlier this year, the Power Authority—along with the IEEP and the New York State Energy Research and Development Authority—helped the municipal systems in Arcade, Lake Placid and Solvay install solar photovoltaic systems at schools in their territories.

The three solar projects are small—producing a total of 5.4 kilowatts.  But besides providing emission-free power, they’re serving as valuable educational tools for students and local residents.  And the more we can make people—young and old—aware of the importance and the promise of renewable energy, the better off we’ll be.

In that regard, I want to briefly shift from the local scene to Washington and to touch on a potentially significant provision in the energy legislation that the House of Representatives passed last month.

The bill calls for $2 billion in what are known as Clean Renewable Energy Bonds—or CREBS—to be made available for issuance by the nation’s public power systems and rural cooperatives to finance renewable energy projects.  CREBs differ from public power’s traditional approach to financing projects in that the lender receives a tax credit from the federal government rather than interest.  Repayment won’t be required until the bonds mature.

This legislation builds on the existing CREBS program—which was approved in 2005 and has an $800 million cap.  The Power Authority and other public power entities strongly support the new program and worked hard to win its approval in the House.  It could greatly benefit those of you looking to install your own renewable projects in the years ahead.

Unfortunately, the energy bill that the Senate passed this year doesn’t provide for a CREBS extension, and the matter probably will have to be resolved in a conference committee.  So I ask you to join us in following this issue and supporting the House provision.

Along with promoting renewable energy and energy efficiency, we must seek to improve the environment and cut dependence on foreign oil by encouraging increased reliance on clean transportation.

Our organizations can point with pride to the partnership through which the Authority finances your systems’ purchases of electric and hybrid-electric vehicles.

To date, 12 systems and the MEUA itself have obtained 19 vehicles of various types under this program—with a total investment by the Authority of close to $460,000.  These vehicles have proved their worth by traveling a total of nearly 270,000 miles.  In addition, I’m told the villages of Fairport and Westfield have ordered hybrid passenger cars for this year.

I should note, by the way, that two Toyota hybrids will be here tomorrow afternoon for you to test-drive.

As you may recall from last spring’s semiannual meeting, the latest addition to the program is a heavy-duty hybrid utility truck with a diesel-electric propulsion system.

Since a number of you have expressed interest in the hybrid trucks, I am pleased to announce that the Power Authority will provide grants to help in purchasing these vehicles.  The grants will be in addition to the usual loans and will cover the incremental cost of a hybrid as compared with a standard bucket truck.

I mentioned earlier that economic development is another major focus of our Global Settlement.  We continue to make gains on this front, but I believe that we can do more.

As you know, the Power Authority’s economic development program for municipal systems and rural cooperatives calls for allocation of 54 megawatts of Niagara power and an equal amount from other sources to promote job creation by businesses in your service territories.

Almost 3,000 jobs in 20 systems have been created since the program’s inception in 1991.  But nearly 34 megawatts of hydropower remain available, after three allocations this year—to Sherrill, Tupper Lake and Massena.  We anticipate that a total of about 80 jobs will be created thanks to these allocations, which should also spur overall capital investment of more than $30 million.

Welcome as these developments are, the need for improvement is clear.

I think the proposed new guidelines that have been put together by a committee of municipal system, cooperative and NYPA representatives offer considerable potential to expand participation in the program and awareness of it.  However, implementation of these guidelines requires approval of all 51 of the state’s municipal systems and cooperatives.  That has not been forthcoming.

I hope we’ll soon obtain the necessary approvals so that we can fully capitalize on this program’s potential.  The Power Authority is ready to help in any way we can.

Our joint efforts to derive maximum benefit from the Authority’s low-cost hydroelectric power, to conserve energy and to clean the air come as our state and nation face a series of pressing energy and environmental problems.

Here in New York, we must develop the infrastructure—both generation and transmission—to avert anticipated power shortages within the next several years.

We must diversify our power sources—in particular by reducing our dependence on natural gas and turning increasingly to clean renewable energy.

We must combat the price volatility that threatens economic growth and the well-being of individual consumers.

And we must remain mindful of our obligation to do all this while protecting and improving the environment.

The Power Authority intends to be an important part of addressing these challenges.  And we will count on the continued support and guidance of your association and your systems.

As members of the public power community in New York State, each of us has a long history of solving difficult problems on behalf of the people we serve and of showing the way to others in our industry.

I look forward to joining with you to continue—and strengthen—this proud tradition.