Hearing to Examine the Policies and Implementation Plans For the Renewable Portfolio Standard

March 7, 2006
Testimony of The Business Council of New York State
Anne Van Buren

Good morning Chairman Tonko, Chairman Karben. I am Anne Van Buren, Director of Energy and Telecommunications for The Business Council of New York State. The Business Council of New York State is the state's largest statewide employer association, representing more that 3,000 businesses, chambers of commerce and other local and regional business organizations across New York. Our membership includes numerous owners and operators of major electric generating facilities, investor owned utilities, as well as the major industrial and commercial businesses for whom the cost and reliability of electric power are important issues. Therefore, we have a significant interest in the development and implementation of a Renewable Portfolio Standard.

Let me be clear from the start - we are not opposed to renewables. Our companies have been the beneficiaries of the state's most abundant form of renewable energy - hydropower. What we do object to is being forced to subsidize those renewables that are not cost competitive.

As I am sure you are aware, we have been a party to the RPS proceeding conducted by the Public Service Commission and have filed numerous comments on this subject over the past several years. The heart of our testimony focused on two things. One - that the implementation of an RPS not negatively impact the price of electricity in New York State. And two - that reliability not be negatively impacted, as reliability is a critical issue to most of the companies we represent.

During the commission's deliberations in the RPS proceeding, there was considerable disagreement on the feasibility and potential impact of an aggressive renewable program.

Because of the potential impact, the commission proposed that the RPS program be reviewed in 2009. At that time, the commission states in its Order, they will review "costs and benefits associated with the program, modifications to the list of eligible resources, and modifications to the delivery requirement." There may be a need for mid-course adjustment but there may also be a need for earlier adjustments

As part our comments during the proceeding, we urged an earlier review date to gauge how well the program was working and to determine if our expressed concerns on price, reliability and capacity were, in fact, occurring.

We applaud this committee for having this hearing. This program should be monitored and measured on a regular basis, and similar hearings or reviews by the Legislature or the PSC could serve this purpose.

The PSC's cost projections for the RPS program begin at more than $24 million in 2006, ramping up to over $167 million in 2013, totaling about three-quarters of a billion dollars for the life of the program. And if you add on the voluntary program LIPA is initiating, the cost goes well over a billion dollars. And we would point out that these are only projections - that due to the speculative nature of the factors driving the cost study (location and output of renewables coming on line, the federal Production Tax Credit, retirements of existing generation, etc.) there is no way of knowing with any certainty if these cost projections are accurate.

New Yorkers are still paying millions of dollars in excess power costs due to the ill-fated "6-cent law". We should not be so eager to run the risk of repeating the problems inherent in mandatory programs.

According to the Energy Information Administration, in 2004, New York's average energy price for all sectors was 57% higher than the national average. In fact, New York is a leader in many areas that increase the cost of doing business - including corporate taxes, workers comp costs, etc.

The last New York State Energy Plan, adopted in June of 2002, observed that "energy prices tend to be important factors in business location and expansion decisions, particularly for energy-intensive businesses... Corporations routinely favor locations that have the greatest profit potential. Less profitable facilities will, at best, not be expanded. At worst, they will be closed, with a resultant loss of jobs." The plan went on to say that "the cost of energy, however, remains an obstacle to overcome in New York's efforts to retain, expand, and attract business."

Reliability is also of paramount importance to our companies. The NYISO's mission is to maintain the reliability of the bulk power system and administer the wholesale market for electricity. To this end, the ISO released, in December, 2005, the state's first Reliability Needs Assessment (RNA) - an important component of New York's long-range Comprehensive Reliability Planning Process. The RNA evaluates generation adequacy and transmission reliability over a ten year planning horizon, and identifies the needs of New York's electric grid. The RNA states that the forecasted system does not meet reliability criteria for the first five year period - or the 2nd five year period for that matter.

The need is particularly acute in Southeast New York State (the lower Hudson Valley through Long Island), however, the greatest potential for siting renewable generation will come in upstate areas, particularly Western New York.

Additionally, given the long lead times needed for the installation of both generation and transmission, and the RPS's predilection to promote generating sources that are periodically unavailable (often at peak demand periods) at the expense of baseload generation, how can we assure reliability to high load areas in need of power?

For years, Article X of the Public Service Law encouraged development of power plants by providing a "one-stop- permitting process" that reduced the time and approvals needed for such plants - without sacrificing environmental oversight. The law expired at the end of 2002.

Without expedited review and permitting, New York will suffer a shortage of generation capacity before too long. The more demand rises in coming months and years, the more consumers will pay for lack of additional generation.

Adding significant amounts of wind power does not negate the need to add more baseload generation, to ensure system reliability during periods of peak demand.

Until we add significant baseload capacity in this state we are not likely to reap the benefits of a truly competitive marketplace where supply will respond to demand. Supply is now thwarted by an expired siting law process and by uncertainty in the financial markets for construction of new baseload facilities.

The bottom line is New York needs more baseload power. Businesses and residents alike use more electricity than ever before. We can import some power from other states and Canada, but for cost and reliability reasons, we need more generation capacity right here at home - as well as improved transmission and distribution lines to deliver power where its needed.

Rather than striving to increase the cost of electricity, state leaders should fulfill the promise of the State Energy Plan by reducing government-mandated surcharges on energy bills.

Such efforts, along with a determined effort to site new generation and transmission facilities, will pay off in more competitive energy costs for both residents and businesses - and more good jobs for New Yorkers.

Thank you for your time. I will be happy to answer any questions you might have.

Respectfully submitted,

Anne Van Buren
The Business Council of NYS
152 Washington Ave.
Albany, New York 12210