New York's Energy Crisis

By EDWARD A. SMELOFF

his summer, New Yorkers are beginning to see the impact of electric utility deregulation  power outages, rate increases, an emergency alert at a nuclear power plant and pressure to site new power plant in several of the city's lowest income neighborhoods.

This is not what was promised three years ago when Gov. Pataki heralded in a new era of competition for electricity. His advisors at the state Public Service Commission predicted we would see lower electric bills, more choices of electricity suppliers, improved reliability of service and less pollution. What has gone wrong?

What has happened is a breakdown in government oversight  at both the state and federal levels  of the transition from tightly regulated utility monopolies to a more freewheeling market for electricity.

Last February's emergency alert at the Indian Point nuclear plant, 35 miles from midtown Manhattan, could have been prevented if the federal Nuclear Regulatory Commission had forced Con Ed to conduct a routine inspection of the system that failed. But the commission has been under congressional pressure to let nuclear plant owners cut costs to be more competitive with other sources of power.

As part of deregulation, the New York Public Service Commission ordered Con Ed to sell off its local power plants, thinking that the new owners would compete against each other and keep the price of power down. But when all power plants are needed to meet peak demand, there is no effective competition.

The Public Service Commission should have anticipated this and figured out how to protect consumers from price-gouging. Now it has been reduced to begging the federal government to step in so that electric rates won't go up by more than 30% this summer.

The Public Service Commission is calling on the Federal Energy Regulatory Commission, one of the more remote and slow-moving bureaucracies ever invented. This commission is responsible for overseeing the New York Independent System Operator, a new organization set up as part of deregulation to manage the wholesale electricity market and run the high voltage grid.

On June 30, New York formally asked the federal energy commission to cap the price of wholesale power in New York for the summer at $1,300 per megawatt hour  more than 25 times higher than the last year's average cost of wholesale power.

It's anybody's guess how long it will take the feds to act on the petition, but it won't help much. California, which is experiencing problems similar to New York, capped wholesale prices at $500 per megawatt hour.

Maureen Helmer, chairwoman of the New York Board on Electric Generation Siting and the Environment, says the solution to this mess is building more power plants in New York City. Big new plants have been proposed for Astoria, Long Island City, Brooklyn, the South Bronx and the lower East Side. Clearly, not all of them are needed.

How the Siting Board will choose among the competing proposals is not clear. Nor is it clear that building some of these plants will be less costly than upgrading power lines that lead to upstate plants. And it's possible that most of the plants wouldn't be needed if consumers, particularly businesses, had tools like smart meters to respond to higher peak prices by shifting loads to other times or by investing in new energy-efficient equipment.

Balancing between these energy solutions will take state leadership. Blind faith in markets is simply not enough.

Original Publication Date: 7/10/00

http://www.nydailynews.com/2000-07-10/News_and_Views/Opinion/a-72710.asp

-- Martin Thompson (mthom1927@aol.com), July 10, 2000

Answers

Asking to cap at 25 TIMES the average cost per megawatt hour as last year?

Mind boggling!

Somewhere down the line there HAS TO BE big reprecussions from this.

-- JackW (jpayne@webtv.net), July 11, 2000.

There aleardy has Jack. Plants are closing up shop all over the place and will continue to do so under these conditions.

-- Christopher Owen (Chris@chris.com), July 11, 2000.