NY IPPs Call For Unified Northeast Energy Market

The creation of a seamless, multi-state energy market between New York, New England and the Mid-Atlantic states is but one of several steps utilities and state and federal agencies should consider implementing to make sure that the Empire State avoids an energy crisis similar to California's, says the association that represents New York's independent power producers.

The Independent Power Producers of New York (IPPNY) last Monday unveiled a five-point program designed to address New York's short-term and long-term energy needs. "New York is at a crossroads: We can either go down the same road as California, leading to high energy prices and debilitating shortages, or we can follow the examples of other regional energy markets so that we continue to enjoy reliable energy at competitive prices," said IPPNY Executive Director Gavin J. Donohue.

Donohue said that while a California-like emergency is unlikely to hit New York this summer, the state will experience energy shortfalls and resulting price increases in the near future unless the government, power suppliers and consumers begin to take steps now to address known problems. In developing its plan, IPPNY looked at the experiences of other states along with those of various metropolitan markets in New York since the state began to restructure its power market in 1996.

In its program, IPPNY argued that current administrative and regulatory differences between New York, New England and the Mid-Atlantic states prevent power from flowing smoothly among them when truly needed. The independent system operators (ISOs) for each of these bordering regions, together with state and federal governments, should expedite ongoing efforts to eliminate such differences and foster the creation of unified Northeast market. IPPNY pointed out that the recent agreement between the New York independent system operator (NYISO) and ISO New England on sharing operating reserves is an example of how this cooperation can work.

The group also called for a push to get new and cleaner diverse power sources on line. The NYISO has said that the state needs 8,600 MW of new generating capacity by 2005 to meet growing demand, but New York hasn't put a major new power plant on line since 1995. New power plants are cleaner and more efficient and New York's rigorous permitting process "guarantees environmental protections," according to IPPNY. At the same time, the group said that the state must maintain its existing base of generation, powered by a diverse mix of fuel types to prevent over reliance on one fuel.

IPPNY also stated that New York's utilities should be encouraged to enter into contracts and use financial risk-management techniques to protect consumers against short-term volatility. While several New York utilities already use these tools to protect customers from price spikes, IPPNY called on all state utilities to do the same.

Conservation is another area that deserves closer attention, IPPNY said. Energy conservation, particularly by commercial and industrial consumers, can help reduce New York's power needs in the short term, as well as help with long-term supplies. More specifically, IPPNY said that the New York Energy Research and Development Authority's "Energy Smart" program, which provides energy efficiency information and conducts research and development on energy efficiency, is a good start. But the association argued that conservation would be further encouraged if all energy users were able to readily see how the cost of electricity differs throughout each day. An easy start would be a tiered system of rates with higher costs for power in mid-day, when power is at peak consumer demand, rather than the morning.

Looking at infrastructure, IPPNY highlighted the need for upgrading transmission lines in the state. The group said that New York's energy transmission system is "antiquated, inefficient and insufficient" to meet the state's rising demand. For example, the inability to transmit power from western New York to the eastern part of the state as well as inadequate power interconnects with the Mid-Atlantic and New England regions inflates prices in the East and New York City. State policymakers need to quickly determine how to build and pay for an improved transmission system that will make it cheaper, easier and more efficient to move power around the state.

IPPNY is a trade association representing more than 100 companies involved in the development of generation, marketing and sale of electric power and natural gas in New York.

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