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NYPA President & Chief Executive Officer Gil C. Quiniones Delivers Keynote Address at the ISO New England - New York ISO Energy Conference: Navigating Change

Contact:
Connie Cullen
(914) 390-8196
connie.cullen@nypa.gov


May 10, 2013

FOR IMMEDIATE RELEASE

The New York Power Authority, along with the other top state energy, economic development and environmental agencies and authorities, have been carrying out the New York Energy Highway--a major initiative of Governor Andrew M. Cuomo--to revitalize and rejuvenate New York State’s electric power system and to make sure it’s able to meet the needs of a 21st- century economy and society for decades to come.

The following is the text of President Quiniones’ remarks as delivered at The Westin Waterfront in Boston, Massachusetts this morning:

“Thank you, Steve, and good morning. It’s a privilege to be part of this very important conference--and all the more so as it takes place at this time and in this city.

Over the past 26 days, the words “Boston Strong” have become synonymous with courage and determination and resilience.  Those of us who have come into the city for this event have seen these qualities firsthand.  And they have been an inspiration to all of us--as they have been to people throughout the nation and throughout the world.

In its own way, this conference--proceeding on schedule--provides still more proof of Boston’s ongoing recovery from last month’s tragedy.  But the conference would be significant even under more routine circumstances.  In fact--as much as anything--it epitomizes the growing cooperation between the New England and New York independent system operators as they work to help ensure reliable, economical electric service to the millions of residents and businesses in their control areas. 

The two ISOs are responsible for administering wholesale power markets, overseeing operations and coordinating planning for systems that together comprise about 70,000 megawatts of generating capacity and almost 20,000 circuit miles of transmission lines. 

Their ongoing efforts to coordinate operations and planning and facilitate increased inter-regional power transactions promise significant benefits to consumers in the seven-state area. 

In this regard, I’m pleased to note that Steve Whitley and his team at the New York ISO are cooperating with ISO-New England and PJM to create a Broader Regional Markets initiative with the goals of eliminating seams between regions, enhancing reliability and operational flexibility and saving money for ratepayers.  This, of course, is in line with the Federal Energy Regulatory Commission’s interregional planning requirements--as set out in FERC Order 1000.

This past January, the New York ISO and PJM began implementing a Market-to-Market protocol that’s intended to achieve the objectives I’ve mentioned, among others.  We’re not yet at that point with ISO-New England--but I hope that efforts to reach an agreement will move ahead in earnest in light of the potential advantages to each of our regions.

Such undertakings--like just about everything else in our industry--are being carried out against a backdrop of enormous change--the change that provides the fitting theme for today’s event.

It may come as a surprise to some of the younger people in this room, but the electric utility industry was once a bastion of stability--the very antithesis of change.  Concepts like markets, or competition or ISOs would have seemed heretical--or worse.  But the move to competitive markets that began in the 1990s has come to fruition.  And we now must meet a series of evolving and expanding policy, environmental and regulatory challenges within the framework of that market structure. 

To mention just a few:

       --Our growing reliance on generally cheap and abundant natural gas, with resulting pipeline constraints and rising prices in some areas --as we’ve recently seen in New England--and implications for reliability, fuel diversity, security of the power supply and the continued operation of older, less economical power plants. 

     --Flat or declining load growth--with no clear indication as to when these trends will be reversed.

     --Increasing operations and maintenance costs as an outgrowth of aging infrastructure and environmental regulations.

     --The looming threat of climate change and the increasingly frequent extreme weather events that wreak havoc with our power infrastructure in addition to their other daunting physical and economic effects.

      --Accelerating penetration of renewables and distributed resources such as combined heat and power, distributed generation and micro grid.

     --And—of course the emerging and extremely serious cybersecurity threats to the electric grid.   The significance of this issue is underscored by the fact that it’s the subject of this afternoon’s keynote speech by Ernie Hayden of Verizon. 

When you think about it, none of these issues would have been front and center at a gathering like this in even the relatively recent past.  Their prominence now is just another sign of the rapid change and new imperatives facing our industry.

With this very much in mind, I want to focus this morning on the New York Energy Highway--a major initiative we’re carrying out in New York State. Our goal--as set forth by Governor Andrew Cuomo--is nothing less than to revitalize and rejuvenate our electric power system and to make sure it’s able to meet the needs of a 21st- century economy and society for decades to come.

First, though, let me quickly tell you something about my organization--the New York Power Authority--since some from New England and elsewhere might not be familiar with us.

The Power Authority--or NYPA--is the nation’s largest state-owned electric utility--and we supply up to about a quarter of the state’s electricity from our 16 power plants and other sources.  We also own and operate about 1,400 circuit miles of transmission lines--about a third of all the high-voltage transmission in the state.  

The Power Authority was founded in 1931 by Governor Franklin D. Roosevelt and served as the model for the Tennessee Valley Authority when Roosevelt became president.   But long after the TVA was up and running, the Power Authority was still struggling to build its first facility-- a large hydroelectric project on the St. Lawrence River.  Much of the delay resulted from intense opposition to the companion St. Lawrence Seaway project.

Some of that opposition came from New England.  But a Massachusetts senator named John F. Kennedy voted for 1954 legislation calling for construction of the Seaway-- and its enactment was a major breakthrough for the power project. The Power Authority went on to build its St. Lawrence project--and a still larger hydro facility near Niagara Falls--before growing into a statewide utility.  The hydropower, by the way, is some of the least expensive electricity in the United States and some of it goes to neighboring states--including Connecticut, Massachusetts, Rhode Island and Vermont.

Today, the Power Authority continues to play a key role in a broad range of critical energy initiatives in New York State.  And none is more important than the Energy Highway-- which is now advancing on a number of fronts.  In fact, each of the 13 action items included in the Energy Highway plan--or Blueprint, as we call it--is on or ahead of schedule.

We’re very excited about this program, which calls for an unprecedented partnership between the public and private sectors to invest about $5.7 billion over the next five to 10 years to upgrade our power infrastructure while protecting the environment, strengthening our economy and creating jobs.

Overall, we expect to develop as much as 3,200 megawatts of additional generation and transmission capacity--almost a third of it renewable or repowered generation that will provide significant environmental benefits.   We’re acting aggressively to make sure we’re ready to maintain or improve reliability of service as large power plants retire. 

We’re accelerating investment in our existing electricity and natural gas systems to enhance their reliability, safety and ability to withstand and recover from storms and other extreme weather events. And we’re investing heavily in the Smart Grid technologies that will shape and define the power systems of the future. 

Our objective with the Energy Highway is not only to routinely replace existing infrastructure, but to seize this opportunity to dramatically modernize and upgrade the system.  And to do so while fully complying with the regulations and requirements of our competitive energy markets. 

We’re moving ahead with this far-reaching initiative at a time when New York State has sufficient electricity to meet the needs of its residents and businesses. Forecasts indicate this will be the case for some years to come. But it’s equally clear that the state’s power system faces a number of significant issues-- which the Energy Highway is designed to address:

     --First, the system is getting old.  Nearly 85 percent of our high-voltage transmission system has been in service for more than 30 years.  More than 50 percent of our existing generating capacity is of similar vintage.

     --We must also resolve a longstanding problem of congestion at critical points on our transmission system.  This often means that excess lower-cost or cleaner power that’s available from upstate--including that from current or proposed wind projects-- can’t reach New York City and other downstate areas where demand is greatest.

     --A number of older coal- and oil-fueled plants have been retired or are facing retirement in the face of pending or potential federal environmental regulations, low natural gas prices or other factors.  The most recent report from the New York ISO--the “Gold Book,” as it is known--notes that during the past year, the owners of 23 generating facilities representing almost 1,700 megawatts of capacity have either retired them or provided notice of their intent to do so in 2013.

    --And finally--in addition to the specific issues I’ve mentioned--we know that we must upgrade and modernize the power system if we are to meet the needs of a growing economy and ensure the health and well-being of our citizens.

Shortly after he unveiled the Energy Highway in his 2012 State of the State address, Governor Cuomo named a Task Force consisting of the heads of the principal statewide energy, environmental and economic development authorities and agencies to oversee planning for the program and develop recommendations for his approval.  I ‘ve been honored to serve as the co-chairman of this five-member group--along with Joe Martens, the commissioner of the State Department of Environmental Conservation. 

The Task Force has also included two participants in today’s program--Garry Brown, the chairman of the state Public Service Commission, and Frank Murray, president and CEO of the New York State Energy Research and Development Authority--as well as Ken Adams, who heads Empire State Development.  So we’ve pretty much covered all the bases.

From the start, we tried to make the Energy Highway process as open and transparent as possible and to draw on a broad range of ideas and views from the power industry and beyond.

To this end, we conducted two major conferences that attracted a total of more than 670 people.  We’ve maintained a comprehensive website that’s continually updated to reflect Energy Highway developments.  And--most important-- to identify proposals and policies that could become part of the Energy Highway, we issued a Request for Information that elicited 130 responses from 85 potential project developers, utilities, members of the financial community and others. 

These responses--along with the many comments they prompted--were invaluable as we developed the Blueprint, which we submitted to Governor Cuomo last October.  The 13 action items I mentioned before are divided among four major categories:

      --Expand and Strengthen the Energy Highway.

      --Accelerate Construction and Repairs.

      --Support Clean Energy.

      --And Drive Technology Innovation.

The progress in each area is detailed in an Update that we recently submitted to the Governor and that’s available on the Energy Highway website--nyenergyhighway.com.  I hope you’ll take a look at it, but for now, let me summarize a few of the highlights.

To address the transmission bottlenecks between upstate and downstate, the Public Service Commission--for the first time-- called for proposals to build new alternating current lines in the most heavily congested pathways.  Six entities--a group of current utility transmission owners and five developers--submitted 16 proposals.   Just over three weeks ago, the PSC announced that it would conduct an unprecedented combined certification proceeding for these projects.  We hope that construction of approved facilities can begin next year, with completion in phases from 2015 to 2018.

All of this is in line with a Blueprint item seeking the investment of $1 billion to develop 1,000 megawatts of new AC transmission capacity.  To reduce environmental impacts, the Blueprint recommended that preference go to projects built along existing rights-of-way or involving the upgrade of existing lines.

We’re also moving ahead on the Blueprint proposal to develop contingency plans to ensure the continuation of reliable service in the event of a major power plant’s retirement. The first of these involves the Indian Point Energy Center, a nuclear facility of more than 2,000 megawatts that’s a vital power source for New York City and Westchester County.

The federal licenses for Indian Point’s two units are up for renewal this year and in 2015.  Because of the uncertainty concerning the issuance of new licenses, New York must be prepared with substitute power by the summer of 2016 to meet the ISO’s reliability standards and to ensure that consumers have safe and sufficient supplies of electricity if Indian Point closes.

We believe the Contingency Plan is a prudent and essential insurance policy that will give us the best and most economical combination of replacement power sources if needed.  On the other hand, for the state to do nothing at this point would be to abdicate its responsibilities.

To begin the process, the PSC ordered Con Edison-- the utility that serves most of New York City and Westchester--to work with NYPA to develop an Indian Point plan. The completed plan--- which the Commission recently approved-- calls for new or upgraded generation and transmission, as well as energy efficiency and peak demand reduction measures and on-site generation projects.  As I’ve indicated, the new resources are to be in place by the summer of 2016.

As one part of this effort, Con Edison, NYPA and New York State Electric and Gas Corporation are preparing to potentially carry out three transmission upgrades.  They’re known as Transmission Owner Transmission Solutions--or TOTS, which certainly brings a brand new meaning to that word.  In addition, NYPA has issued a Request for Proposals--with responses due by May 20--seeking 1,350 megawatts of other transmission projects and new generation.  The PSC will determine which projects resulting from either or both of these two approaches are ultimately carried out.

We’ve also seen considerable progress on the Blueprint’s calls for accelerated investment in the existing electric and gas systems. 

The Power Authority has launched a $726 million Life Extension and Modernization program for our statewide transmission system--to be completed in phases through 2025--and plans accelerated generation and transmission investments of $300 million over the next five years--including the first expenditures for the Life Extension initiative.  Meanwhile, the PSC is considering measures to expand the use of natural gas--especially for residential and business heating--- and will employ rate cases and other opportunities to address efforts by investor-owned utilities to upgrade their electric and gas distribution systems.  And the Commission staff will work with the utilities and others to communicate to consumers the benefits and challenges of converting to natural gas and the process for doing so.

Statewide, the Blueprint called for a total investment of $1.3 billion through 2017 to strengthen electric and gas infrastructure.

To promote the Blueprint’s clean energy goals, the New York State Energy Research and Development Authority-- NYSERDA-- has issued an RFP that provides $250 million for development of renewable projects.  We expect contracts under this competitive process to be awarded by this summer, with projects in service by the end of next year.   The goal is to use the state money to leverage total public-private funding of up to $675 million and development of 270 megawatts of clean energy projects.

In response to the Blueprint’s call to Drive New Technologies, NYSERDA has funded five new projects under the state’s existing Smart Grid program and has more funding on the way with a pending RFP.  In addition, NYSERDA and NYPA are developing plans for an Advanced Energy Management Control Center that would support design and testing of Smart Grid equipment and technologies and help to create markets for them. 

We want to solidify New York’s role as a national leader in identifying and implementing Smart Grid solutions and--for that matter--other advanced technologies in such areas as power system operations, security and energy storage.

We’re also carrying out several policy recommendations included in the Blueprint--including those related to advancing distributed solar generation, offshore wind and energy efficiency.  To take a prime example, a total of 242 megawatts of on-site solar photovoltaic generation has been installed or is being developed under Governor Cuomo’s NY-Sun initiative--more since the start of 2012 than in the entire previous decade.

That’s just some of what’s going on as we work to make the Energy Highway a reality.  As I mentioned, the full Update is available on our website, and I encourage you to check it out for additional information.

The Energy Highway--like the challenges and trends I mentioned at the start-- reflects and embodies the profound change that has become a hallmark of our business.  How this change will eventually play out is still uncertain.  But what is clear is that we must acknowledge and vigorously address it--or risk falling victim to it.

I have every confidence that we will be equal to that task--and to that test.  And that--as we move forward--we will help to forge a bright new future for the electric power industry and all who depend on us.

Thank you--and have a productive and enjoyable conference.” 

About NYPA:

The New York Power Authority uses no tax money or state credit. It finances its operations through the sale of bonds and revenues earned in large part through sales of electricity. ■ NYPA has been designated as the lead entity via Executive Order 88 by Gov. Andrew M. Cuomo to form a central management and implementation plan to carry out his Build Smart NY plan to reduce energy use by state facilities by 20 percent by 2020. ■ NYPA is the nation's largest state public power organization, through the operation of its 16 generating facilities in various parts of New York State, participation in a unique public/private partnership to contract for power from a clean generating plant in Queens, and its operation of more than 1,400 circuit-miles of transmission lines. ■ More than 70 percent of the electricity NYPA produces is clean renewable hydropower. Its lower-cost power production and electricity purchases support hundreds of thousands of jobs throughout the state.■ For more information visit www.nypa.gov or follow @NYPAenergy on Twitter.




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