New York”™s regional utilities would be allowed once again both to produce and to transmit electricity under a state Assembly bill that seeks not the regulated monopolies of the past, but a broader-based energy system using diverse sources. It would allow utilities again to produce energy, while mandating state Power Authority action to create new supply and encourage conservation.
New York”™s energy supply was originally deregulated in the late 1990s on the promise that free-market competition would reduce the cost of electricity; instead, according to the bill”™s sponsor, state Assemblyman Richard Brodsky, D-Greenburgh, prices for electricity in New York have risen some 40 percent since then and the state”™s energy infrastructure has not been upgraded to reflect greater demand on an aging system.
The bill is being introduced as energy shortages are being forecast in five years for southeastern New York state, according to the annual power trends report put out by Independent System Operator (ISO), a nonprofit corporation created to oversee New York”™s energy market.
“Additional resources ”“ generation, transmission or demand-side programs ”“ will be needed by 2012-2013 to address the reliability needs of New York,” the ISO reported in February in its trends report for 2008. The report added that a need for more electric power “will become acute by 2017” if steps aren”™t taken to meet the expected increased demand. The report said use is rising at a rate of 2 percent annually in the lower Hudson Valley, New York City and on Long Island.
It takes about six years under best-case scenarios to create a power plant from planning to approval to operation in New York state, according to energy officials. Conservation measures, the so-called demand-side programs, can be implemented much more swiftly, but utilities have no incentive to do so, since their revenues rise with electrical use.
However, utilities have been directed by the state to devise mechanisms that “decouple” their revenues from their sales. There is no timetable for implementing a change, but the rising costs and growing awareness of a need to cut carbon emissions are pushing officials to action. Gov. David Paterson in April appointed an Energy Planning Board charged with submitting a draft state energy plan by April 1, 2009.
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The state Legislature also wants to be heard on energy issues. The Brodsky energy bill is A-9611A, the Electric Power Re-regulation Act. Among its provisions, it would seek to allow for more power through new facilities and conservation measures and it would create “a more responsible and transparent market” for selling electricity, reforming the rules under which bids are made and accepted.
“It would reduce electric costs to people around the state, businesses and residential customers alike,” Brodksy said. “It does that by creating more supply, allowing utilities to get back into the supply business and getting the (state) Power Authority to lead the effort in fostering power-supply development. And it creates conservation programs to reduce demand.”
New York”™s previous system of regulated regional monopolies powered New York for a century until the state began to deregulate its electrical supply in the late 1990s, creating a free market auction where power producers inside and outside state boundaries offer electricity for sale each day to the ISO, Â which serves as auctioneer.
Brodsky”™s bill would change bidding rules to require that a company providing power receive the agreed-upon rate of payment it priced power out at, rather than as under the current system, where all producers are paid the highest rate bid and accepted by ISO that day throughout the sprawling system. Brodsky described that provision of the bill as “reforming that insane bidding process.”
Under deregulation, the state”™s six regional utilities, including Central Hudson and Con Ed, were required to divest themselves of power-generating facilities, such as the Danskammer and Roseton power stations in Newburgh, which Central Hudson sold to Dynegy Corp. of Houston. Instead of generating power, the local utilities became responsible only for maintaining the infrastructure and serving as facilitators for bills and repairs. Electric bills thus have two sets of costs reflected in the charges, the price of the electricity, plus a “line charge” the utility levies to maintain the distribution system. Utilities claim they have little control over the sale price of power, because they do not generate any. Brodsky”™s bill would allow them the option of becoming power generators again.
“We agree in concept,” said John Maserjian, a spokesman for Central Hudson Energy Group. “Utility ownership of generation, we believe, would accelerate the construction of needed generation, both renewable and newer, more efficient conventional sources; and as part of a coordinated energy plan would help New York achieve its environmental and generation-capacity goals,”
Maserjian said that “Although it is quite unlikely that there would be a return to the old model of utility ownership of all electric generation,” he said utility investment could diversify the energy mix and promote renewable energy.
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The bill would also require the state Power Authority and Public Service Commission to build four power stations within the next 10 years. The bill also prioritizes energy conservation by establishing a policy goal to lower electricity use statewide by 10 percent within 12 years and an additional 5 percent five years later. To do so, the Power Authority and PSC must convene a joint hearing on reaching the conservation goal set out in the bill.
The bill also creates a power hierarchy, with energy conservation and efficiency, noncombustible renewable energy resources, combustible renewable energy sources and nonrenewable combustible energy sources being officially ranked in that order as preferred options.
The Brodsky bill has no Senate companion and thus can do little more than spark debate about state energy policy. But Brodsky said the bill is a way of contributing ideas and policy direction at a time of unprecedented energy upheaval in the state and nationally. “This (introducing a bill) is an essential part of getting anything done.”
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