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NYISO Warns of Downstate Supply Shortage by 2008

The New York Independent System Operator (NYISO) issued a warning Wednesday about potential future supply deficiencies in the state between 2008 and 2011, possibly sooner in New York City and Long Island, because of the decommissioning of several existing plants and underinvestment in new generation.

However, the grid operator said there should be adequate supply to meet peak demand this summer. Peak demand growth in New York continues to be modest, with this summer's peak estimated at 31,960 MW, up from 31,400 MW (weather adjusted) last summer. Supply is expected to exceed forecasted demand because of an increase in installed generation and new regional links, such as the Cross Sound Cable (330 MW).

The state as a whole is expected to enjoy a 1,522 MW margin over its minimum requirements, while New York City and Long Island, respectively, should have 330 MW and 240 MW over their minimum requirements, the ISO said.

However, downstate supply-side deficiencies are expected to impact capacity by 2008, possibly sooner, if new generation projects are not commenced immediately, the ISO said in its annual state-of-the-grid report called Power Trends 2005.

The report also highlighted the supply, transmission and demand-side management achievements over the last five years on its 10,775-mile high voltage electric transmission system. Since the issuance of the NYISO's first report in March 2001, more than 3,000 MW of new generation has been built in New York, primarily in downstate areas where it was needed most, and another 2,038 MW is under construction. There also have been two new controllable transmission lines (one in operation and one approved), 1,500 MW of demand-side resources, and proposals for significant amounts of renewable power (wind generation).

"As confirmed by today's report, the NYISO and its stakeholders have achieved a great deal to maintain the safety and reliability of the grid, and to ensure fair and transparent markets," said CEO Mark S. Lynch. "Nonetheless, lessons learned from both the blackout of 2003 and data included in today's report indicate that we cannot ignore the major issues that we face. The increase in demand and the lack of new generation, along with the failure of state and federal lawmakers to pass important energy legislation, pose great risks to reliability."

NYISO made several recommendations regarding future power grid planning in the state and the Northeast as a whole. It urged stakeholders to use the new Comprehensive Reliability Planning Process and market mechanisms to ensure the development of needed generation, transmission, and demand-side resources. It also urged stakeholders to promote the immediate siting of sufficient in-state generation to meet capacity requirements between the years 2008 and 2011.

However, the NYISO said without the prompt reenactment of the Article X power plant siting law by the New York State Legislature it will be very difficult for new generation to be built in a timely manner to meet future needs. The state's power plant siting law was allowed to lapse in 2002 and the legislature has failed to reenact it.

"Potential investors in generating resources in the state need to know what they face in the way of licensing costs, schedules and the likelihood of success," the ISO said in its report. "The reenactment of Article X will enable investors to make such assessments. We encourage the legislature to act promptly on this important legislation. Failure to do so will result in emptying the pipeline of new generating projects that will be needed in the near future, creating a potential generation shortage."

The ISO also said that there should be a regional focus on fuel diversity and away from continuing to build only natural gas-fired power generation. "The nation in general and the Northeast in particular must fashion an effective fuel-diversity strategy for dealing with the increasing use and dwindling domestic reserves of natural gas," NYISO said. "Such a policy will have to include increased use of renewables, improved incentives for efficiency and utilization of other domestic fuels."

The grid operator also encouraged Congress to act promptly to pass electric reliability legislation that includes mandatory reliability standards.

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