Public Hearing to Consider and Analyze the Long-Term Base Load Energy Generation and Transmission Needs of the State of New York

NYSEG 16

Thomas Rumsey 158 167 17 VP of External & Regulatory Affairs

Rick Gonzalez 18 Senior Vice President & CEO

New York Independent System Operator 19

Kenneth J. Pokalsky 176 185 20 Vice President, Government Affairs

Darren Suarez 21 Director, Government Affairs

The Business Council of New York 22

Michael Lutz 190 199 23 Local 966

Phil Wilcox 24 Local 97

International Brotherhood of 25 Electrical Workers 1 SENATOR MAZIARZ: Good afternoon, everyone, 2 and thank you very much for being here. 3 I'm Senator George Maziarz, Chairman of the 4 Senate Energy and Telecommunications Committee. 5 I want to thank my colleague, 6 Senator Patty Ritchie from the north country, and 7 also, Assemblywoman Jane Corwin, who will be 8 representing, next year, the town of Somerset, and 9 currently represents parts of Niagara and 10 Erie County. 11 We are also going to be joined, he's just a 12 few minutes away, Senator Tom O'Mara, and 13 Senator Jim Alesi, who are on their way here. 14 We also have a representative from 15 Senator Cathy Young's Office in attendance here 16 today. I'm not sure if there are any other members 17 that are represented here. 18 I know that Senator Kennedy was expected. We 19 haven't heard back from his office yet. 20 I would just like to open, before I introduce 21 my colleagues for their opening statements, I would 22 just like to welcome all of you to the town of 23 Somerset, the village of Barker. 24 This public hearing concerns the future of 25 our state's energy generation and transmission 1 systems. 2 The witnesses who came from all over our 3 state, as well as the assembled spectators, I want 4 to thank all of you for being here. 5 In particular, I would also like to thank, 6 and he is also going to be here to testify today, 7 Dan Engert, the Supervisor of the town of Somerset, 8 for allowing us to use this space. 9 Today, we sit almost in the shadow, 10 literally, of the Somerset coal plant. This is the 11 cleanest coal plant on the east coast, and both the 12 former and current owners of this facility have 13 poured tens of millions of dollars into making this 14 plant environmentally compliant and 15 state-of-the-art. 16 The same can be said of the NRG-owned coal 17 plants at Huntley and Dunkirk. 18 New York is the envy of the nation because of 19 its diverse fuel mix. We've an abundant hydropower, 20 natural gas, oil, nuclear, coal, and every renewable 21 energy imaginable. This diversity protects us from 22 fluctuations of the market, and allows us to shift 23 to the cheapest sources of energy to fuel our 24 economy. 25 I strongly believe that maintaining this 1 diversity is vital to our state's energy future, 2 especially if we are to hold down utility costs, 3 protect robust reliability, and promote New York 4 generation jobs. 5 There are some, of course, who disagree with 6 this approach. 7 They have taken the ideologically inflexible 8 position that coal is the enemy and should be 9 eliminated from our energy portfolio. Their 10 position is not a practical one, it's a political 11 one. 12 It's sad that some groups, centered mostly 13 downstate, who have never been to our community, 14 never seen the plant here at Somerset, never met its 15 workers, would embark upon a crusade to close this 16 plant. The closing of this and other coal plants in 17 Western New York would cause immeasurable harm, not 18 only to the workers who depend on these jobs, but 19 also to the towns, cities, and school districts who 20 depend on the tax revenue to support these vital 21 services. 22 Even though I do not personally believe that 23 we should move away from the coal-fired generation, 24 I can also see the forces arrayed against it, and 25 understand that we may need a new plant to 1 revitalize and renew our upstate generating 2 industry. It's clear to me that a solution that can 3 lead to a future for Somerset, Cayuga, Huntley, and 4 Dunkirk here in Western New York, Bowline in the 5 Hudson Valley, Port Jefferson in Long Island, and 6 dozens of other plants across the state, lies with 7 the conversion to natural gas. 8 Natural gas prices are at an all-time low and 9 are projected to stay that way for an extended 10 period of time. This provides us with a unique 11 opportunity to take advantage of an abundant 12 resource to power our energy future. 13 The operators of Huntley, Dunkirk, and 14 Somerset plants, who you will hear from today, are 15 committed to our communities. They are willing to 16 invest hundreds of millions of dollars more in their 17 facilities to convert them to state-of-the-art 18 combined-cycle natural gas plants. These will be 19 the cleanest and most efficient in New York State, 20 and ensure that generating capacity and jobs remain 21 in our communities. 22 These companies need a partner in order to 23 make the investment required. They need a hand up, 24 not a handout. 25 The Governor's Energy Highway Initiative is a 1 great start and, hopefully, it will provide a road 2 map to a real statewide solution to modernize and 3 maintain our power-generating capacity. 4 I believe the elements necessary to provide 5 these businesses with the assistance and certainty 6 they need are, as follows: 7 We should allow power producers to access 8 Excelsior job credits in order to encourage job 9 creation; 10 We should create a clean-fuel repowering tax 11 credit equal to at least 12.5 percent of the cost of 12 construction or repowering costs for any generator 13 who commits to and completes a project aimed at 14 meeting the most current environmental standards and 15 burning cleaner fuel; 16 We should allow projects that meet the 17 environmental criteria outlined above to access the 18 State debt financing through the New York Power 19 Authority to lower construction costs; 20 Every regional economic development council 21 should adopt as part of its regional strategy, a 22 plan to maintain and encourage clean power 23 generation; 24 We should sell inefficient and aging State 25 generation assets, like the NYPA peaker plants in 1 New York City, and create the New York Clean Energy 2 Innovation Fund to assist plants further with the 3 cost of repowering; 4 We need to create a level playing field, and 5 as such, we must take a critical look at current 6 environmental exemptions enjoyed by some oil-fired 7 plants that have negatively impacted the capacity 8 market for all other upstate generators; 9 We also need to look at why we continue to 10 apply crippling RGGI charges to our in-state 11 generators but not imported power, and, of course, 12 we should not make RGGI worse for our own companies; 13 Any excess revenue that is brought in from 14 possible gas drilling, Power Authority operations, 15 NYSERDA collections, or any other energy-related 16 funds should be dedicated to the repowering and 17 redevelopment of our energy-generating fleet. 18 The bottom line is, that every citizen of our 19 state will benefit from a robust energy industry, 20 and we must do all we can to support it and 21 encourage it. 22 This industry currently employs over 23 10,000 New Yorkers, and we need to keep those jobs 24 here in New York. 25 Before I leave the generation topic, let me 1 say one more thing, clearly, and unequivocally: 2 The Indian Point generating station, which 3 employs 1,300 people, pays tens of millions of 4 dollars in property taxes, and has a stellar safety 5 record, must be a part of our energy future. As a 6 nuclear plant, it produces no emissions, as well as 7 2,000 megawatts of reliable and clean energy for 8 Downstate New York. 9 As a recent report by the Manhattan Institute 10 clearly showed, closing this plant will rise energy 11 prices, put thousands of families out of work, and 12 produce no positive results. 13 Again, let's not allow politics to trump 14 common sense. 15 Now, let me move on to talk about 16 transmission. 17 Everyone in the energy industry knows that 18 our state does not have a generation problem at the 19 moment. We have a transmission problem. Everyone 20 acknowledges that this problem has to be addressed, 21 but on the method, we have reached -- on the method 22 of addressing that, we've reached a fork in the 23 road. 24 Some would like to simply run a giant 25 "extension cord" from Canada down the Hudson River. 1 This project would create no jobs outside of the 2 downstate region, bypass every generator on the way, 3 and simply dump government-subsidized power into the 4 downstate market. This will devastate upstate 5 generators, eliminate thousands of jobs, and, 6 according to the chief economist at the PSC, cause 7 upstate electric rates to increase while city rates 8 decline. 9 The developers claim the cost will be roughly 10 $2 billion, and the ratepayers will not be asked for 11 a dime. 12 I just don't think this is true. 13 Two years ago, NYPA built a power line across 14 the Hudson River, from New Jersey into New York, a 15 distance of only a few miles. The cost, nearly 16 $1 billion. 17 Yet we are told that this project, running 18 under the Hudson River for 300 or so miles, will 19 cost only 2 billion. 20 Con Edison says that this project will cost 21 11 billion, not 2 billion. 22 If they are correct, as I believe they are, 23 who will pick up the other 9 billion? My guess is 24 that you and I will. 25 This project will also try to use 1 eminent domain to take away New Yorkers' property 2 and force them from their homes in Stony Point, 3 New York. This project is being pushed by 4 Transmission Developers, Inc., and is called the 5 "Champlain-Hudson Power Express." 6 The plan I and others prefer takes the 7 opposite course. It would invest billions into our 8 state's economy, and create more than 9 30,000 construction and permanent jobs. It would 10 relieve existing transmission bottlenecks which 11 strand 1,500 or more megawatts of power upstate. 12 This project would relieve this congestion, and 13 allow generating stations upstate, hungry to produce 14 power, to access customers in a downstate region 15 hungry to consumers. 16 Just as importantly, this project would allow 17 us to maintain and expand upstate generation, 18 creating more jobs and protect our fragile tax base. 19 This project, proposed in the Governor's 20 "Energy Highway" RFI, called "Transco," is a real 21 solution to our energy transmission needs, not a 22 Band-Aid attached to an extension cord. 23 New York needs this project, and I strongly 24 support it. 25 Some might ask the question: Why not do both 1 projects? 2 The answer to that is simple. 3 First, the economic viability of some of the 4 Transco upgrades, particularly those that might 5 impact Western New York, would be fatally damaged by 6 the installation of the Champlain-Hudson power line. 7 In addition, Hydro-Québec, the State-owned 8 utility backing CHPE, has 10,000 megawatts of 9 additional power under development that would need 10 more customers, and no one has more customers than 11 Downstate New York. 12 Mark my words, if the PSC approves the 13 Champlain-Hudson line, it won't be the last line 14 under the Hudson. The result will be a complete 15 dependence on Canadian power, devastation of our 16 power-generating industry, a gigantic loss of jobs 17 in New York, and higher energy rates for 18 New Yorkers. 19 No, we can't do both; it's one or the other. 20 And, in that case, we must choose investing 21 in New York over investing in Canada. 22 That is why I have proposed Senate Bill 7391, 23 a bill that prohibits projects like CHPE from using 24 eminent domain. I believe that will effectively 25 kill the project. 1 Over the last two years, I've been proud to 2 work with Governor Cuomo to solve some of our 3 state's biggest energy problems. These include 4 developing a new Article 10 siting law and creating 5 a permanent placement for Power for Jobs to recharge 6 New York programs. 7 Critics said it couldn't be done, but working 8 together with this governor, we did it. Now we face 9 transmission and generation challenges that affect 10 each and every New Yorker. 11 I know that working with Governor Cuomo and 12 the Assembly, my colleague Assemblyman Kevin Cahill, 13 the Chair of the Assembly Energy Committee, these 14 problems can also be solved, and I look forward to 15 getting started. I am willing to negotiate and 16 compromise, but only if the resulting policies 17 protect our in-state generators and the workers who 18 depend upon them, and strengthen, and not weaken, 19 our communities. 20 The time for talk is passed, the time for 21 action is now. And, going into the next legislative 22 session, this "energy highway," working again, along 23 with Governor Cuomo, is going to be our top 24 priority. 25 I do want to thank, and also introduce, 1 Senator Tom O'Mara, who arrived. 2 I said you were going to be 10 minutes late, 3 and we're right on point. So -- 4 SENATOR O'MARA: Perfect. 5 SENATOR MAZIARZ: With that, I would like to 6 ask my colleague Senator Ritchie to say a few 7 opening comments. 8 SENATOR RITCHIE: First of all, I would just 9 like to start off by thanking Senator Maziarz for 10 holding this important hearing today, and those of 11 you who are going to testify. 12 This really is an important issue for all of 13 New York State. 14 I represent an area that has three nuclear 15 facilities located in it, along with a number of 16 other generating facilities, including a large steam 17 plant. So, it is my priority to put as many people 18 back to work in my district as possible, along with 19 putting back as many people in the state of New York 20 back to work. 21 So, I look forward to hearing the testimony 22 today, and listening to Senator Maziarz, who's done 23 a lot of work on this issue, to make sure that we're 24 making the correct choices, we're putting as many 25 people back to work here, and we're doing what we 1 can to lower energy costs. 2 SENATOR MAZIARZ: Thank you, Senator Ritchie. 3 I now ask, Senator O'Mara. 4 SENATOR O'MARA: Thank you, Chairman. 5 And thank you for speaking for 10 minutes so 6 that I could get here to get a testimony before it 7 begins. 8 But, I share Senator Maziarz's concerns about 9 protecting and promoting the viability of our own 10 New York State power industry, so that we have our 11 own local source of energy, and not more reliance, 12 further reliance, upon out-of-state, and in fact, 13 out-of-country generation. 14 So, I look forward to your testimony today, 15 and comments on this very important issue on our 16 energy sources here in New York State. 17 Thank you. 18 SENATOR MAZIARZ: Thank you very much, 19 Senator. 20 And now our colleague on the Assembly side of 21 the aisle, Assemblywoman Jane Corwin. 22 Assemblywoman. 23 ASSEMBLYWOMAN CORWIN: Thank you very much, 24 Senator, and thank you all for who -- came today to 25 testify. 1 As you can see, I'm not a senator, and this 2 is a Senate hearing, so I very much appreciate the 3 invitation by Senator Maziarz to include me in this 4 very important meeting and discussion. 5 As he had stated earlier, this part of 6 Niagara County will soon be becoming part of my 7 district, but have -- I have been, for the last 8 four years, representing other parts of 9 Niagara County. 10 And, I can tell you firsthand, that the jobs 11 that are created by this power plant here in 12 Somerset are critical to the economy here in 13 Niagara County and Western New York. And any kind 14 of decisions -- policy decisions that are going to 15 be made regarding energy in New York State, aside 16 from having a huge impact on the entire New York 17 economy, certainly has a dramatic impact on what's 18 happening here in Western New York. 19 I just was at a business meeting this past 20 week, with business people from around New York 21 State, and I can tell you the big conversation that 22 I heard, was discussing energy and energy costs for 23 businesses. 24 Particularly manufacturers, we've had a big 25 push to increase manufacturing in New York State, 1 and, certainly, the cost of power is a huge part of 2 that equation. 3 So, no one understands more than I do how 4 important it is that we have low-cost power for our 5 businesses to be able to create these jobs. 6 We also have to make sure that those jobs are 7 created here in New York State, and certainly, 8 just -- without having to read the documentation, it 9 just doesn't make sense to be pulling power in from 10 Canada, when we've got power plants throughout the 11 state, with people who have the expertise, the 12 knowledge, and the ability to be able to provide 13 that energy at a lower cost to our business owners 14 and to our ratepayers. 15 So, I look forward to hearing the testimony. 16 I -- certainly, if someone can explain to me 17 how this Champlain Express makes sense, I -- I'm 18 willing to hear it, but, right now, I don't see 19 where there's any common sense in that at all. 20 But, I do look forward to the testimony 21 today. 22 Thank you. 23 SENATOR MAZIARZ: Thank you very much, 24 Assemblywoman. 25 I do want to note, the Assemblywoman just 1 recently did tour the Somerset generating station 2 also. I saw that in the local media. 3 I do want to just acknowledge -- he's going 4 to be testifying in the third spot, but I do want to 5 acknowledge, and just thank, I did that in my 6 opening remarks, but he wasn't here at the time, the 7 Supervisor of the town of Somerset Dan Engert, who's 8 arrived. 9 Dan, thank you very much for allowing us to 10 use your facilities here today. 11 Our first witness is Ray Long from NRG 12 Energy. 13 Ray, thank you very much. 14 RAYMOND LONG: Thank you, Senator. 15 Senator Maziarz, and members of the 16 Committee, my name is Raymond Long. I'm the 17 vice president of government affairs for NRG Energy 18 here in New York. 19 I would like to begin by thanking 20 Senator Maziarz and the Committee for your 21 leadership on energy issues, and for taking the time 22 to hold this hearing today. 23 As you may know, NRG is an owner and operator 24 of electric-generation facilities nationally. Our 25 portfolio includes generation fueled by natural gas, 1 coal, and oil. We own two nuclear reactors in 2 Texas. 3 Our thermal division owns and operates 4 combined heat and power facilities that serve 5 municipalities and businesses throughout the 6 country. Additionally, NRG is the largest developer 7 of electricity from solar technologies nationally. 8 We're the partners -- we have partners in 9 four wind farms. 10 We serve over 1.8 million customers -- retail 11 customers in Texas and the northeast states, 12 including New York. 13 And we are investing heavily in 14 electric-vehicle infrastructure technology through 15 our eVgo company, which is creating the nation's 16 first privately funded electric-vehicle charging 17 system. 18 That will be my own commercial for the whole 19 company. I'll stick to New York from now on, out. 20 Here in New York, NRG purchased five 21 electric-generating facilities in 1999, located in 22 the communities of Dunkirk, Tonawanda, Oswego, 23 Queens, and Staten Island. 24 We own nearly 4,000 megawatts of installed 25 capacity in New York, which is enough to power 1 approximately 3.2 million homes. 2 These facilities have provided reliable, 3 competitive, and clean power to New York customers 4 for many years. NRG plants have among the highest 5 availability factors in the industry. The units at 6 each facility are bid into the New York Independent 7 System Operator, and provide energy, as well as 8 reliability services, such as voltage support, 9 reserves, and load-following capabilities. 10 Moreover, these facilities play a large and 11 important role in their communities, providing 12 significant property-tax payments, jobs, and 13 contributing to local economic activity from goods 14 and services procured to keep the facilities in 15 operation. 16 In addition, NRG employees, individually, and 17 collectively, contribute to the community in many 18 other ways, large and small, as friends, volunteers, 19 customers, individual taxpayers, and neighbors. 20 Together, NRG plants in New York pay more 21 than $34 million per year in property taxes, and 22 generate an estimated $207.8 million of additional 23 economic benefits from goods, services, and 24 downstream jobs. 25 And those numbers are annual. 1 In my testimony, I have provided a breakdown 2 of benefits, per plants, which I'm going to skip 3 over as part of this testimony -- my verbal 4 testimony. 5 Over the past few years, NRG has taken steps 6 to operate its facilities in New York as efficiently 7 and cost-effectively as possible, to remain 8 competitive in the changing marketplace, and to 9 comply with evermore stringent environmental 10 regulations. We have invested approximately 11 $400 million at Dunkirk and Huntley to install 12 state-of-the-art emission-control equipment. 13 These two facilities comply with 14 New York State and federal environmental 15 regulations, and they are among the cleanest coal 16 facilities in the United States. 17 Second, each of our facilities has cut costs 18 to ensure that we are as competitive as possible in 19 the marketplace. This is especially important for 20 coal facilities, like Huntley and Dunkirk, which, 21 traditionally, have higher fixed costs, and reducing 22 those costs as much as possible have made these 23 facilities more competitive. 24 Finally, NRG has proposed repowering 25 initiatives at various facilities, to replace the 1 older equipment with more efficient, 2 cost-competitive, and cleaner technologies. 3 We have submitted the following three 4 initiatives to the Request for Information issued by 5 the Governor's Energy Highway Task Force: 6 The first one I'll mention is our Astoria 7 project in Queens, New York, which would, 8 essentially, replace the existing plant with 9 four natural gas combined-cycle units. 10 The second proposal that we made is at our 11 Huntley facility in Tonawanda, New York. We would, 12 essentially, run a natural gas line in the facility, 13 allowing us to be able to co-fire natural gas and 14 coal, which would provide both economic and 15 environmental benefits to the facility. 16 And then, finally, at Dunkirk, we've proposed 17 a natural gas combined-cycle facility there. 18 And under this proposal, NRG would bring a 19 natural gas line into the existing facility in the 20 near term. A new natural gas combined-cycle plant 21 will then be constructed, with an approximate 22 commercial online date of 2017, at which time the 23 coal units would be permanently retired. 24 This is the only project proposed in New York 25 to date that lays the groundwork to phase out an 1 older coal plant and replace it with new 2 state-of-the-art natural gas facility. 3 The environmental benefits from this proposal 4 include a 100 percent reduction in mercury emissions 5 and 99 percent reductions in sulfur di- -- oxides 6 and nitrogen dioxides. 7 It creates 500 construction jobs and 8 preserves 27 permanent positions, while preserving 9 the tax base for the Chautauqua County community. 10 This project has very strong support from the 11 Western New York community, including the entire 12 delegation of state, county, and local elected 13 officials, which is led by Senator Cathy Young. 14 Now, let me say a few things about the 15 Governor's Energy Highway Task Force. 16 NRG applauds the Governor for taking the 17 initiatives to spearhead a comprehensive process to 18 upgrade and modernize New York State's electric 19 power system. Clearly, this initiative has the 20 ability to provide consumers in New York with a 21 variety of benefits, including: 22 Growing the New York economy by investing in 23 infrastructure that would create jobs and economic 24 activity; 25 Improving the environment by repowering 1 New York's generation fleet, and meeting growing 2 energy demand downstate by developing 3 energy-generation resources. 4 Through a combination of projects, like the 5 repowering of older generation facilities and 6 targeted in-state transmission upgrades that will 7 reduce bottlenecks and allow for the improved flow 8 of power, New York can achieve the greatest return 9 for its investment dollars for many years to come. 10 In-state projects, like those proposed by 11 NRG, will generate: 12 First, excellent, well-paid jobs -- permanent 13 jobs and construction jobs for New Yorkers; 14 Two, millions of dollars of tax revenues for 15 host communities; 16 Three, millions of dollars of ongoing 17 economic activity in the form of payroll, and goods 18 and services procured to serve these facilities in 19 New York; 20 Four, huge environmental benefits; 21 And, five, more price-competitive sources of 22 energy for New Yorkers. 23 Now, the recommendations from the task force 24 of the next announced step in this process. 25 It is critical for these projects to become a 1 reality, that the task force initiates a process to 2 competitively award long-term contracts. 3 As we have seen in every major project 4 developed in New York, and with few exceptions, 5 everywhere in the United States, long-term contracts 6 have been the key for developers to secure the 7 financing necessary to move a project forward. 8 There are several examples of when New York, 9 with NYPA, Con Ed, and LIPA, has entered into 10 long-term contracts for generation projects. There 11 are many ways to structure these agreements; and, 12 therefore, to manage costs by sharing the risks 13 between the developer and the contracting entity. 14 But the important thing is, that there's a 15 financeable contract for the desired project. 16 Let me say a few words about the 17 Champlain-Hudson Power Express project. 18 This project, backed by 19 Transmission Developers, Inc., and The Blackstone 20 Group, is challenged on a number of different 21 levels. 22 First, the project violates the spirit of the 23 competitive energy and capacity markets established 24 in New York. The transmission line has one entry 25 point in Canada, and one exit point proposed in 1 Queens. This highway, without on-and-off ramps, 2 leaves no realistic ability for New York generators 3 to utilize this line; and, therefore, only heavily 4 subsidized generation from Canada will be able to 5 access the New York City market. 6 Additionally, the addition of up to 7 1,000 megawatts of power from Canada will further 8 threaten the viability of in-state generation. 9 Second, the Blackstone-TDI project will not 10 create any meaningful jobs for New Yorkers. 11 Although the project would allegedly create some 12 short-term construction jobs, these are short-term, 13 and they're insignificant compared to the jobs 14 created by in-state generation projects that I've 15 already discussed. 16 And, finally, the Blackstone-TDI project 17 would likely escalate the timing of the closures of 18 existing in-state generation facilities by 19 artificially suppressing wholesale prices below 20 sustainable levels. 21 As you know, upstate plants are already 22 economically challenged due to low natural gas 23 prices, low capacity prices, and higher compliance 24 costs. 25 The development of Blackstone-TDI would 1 likely contribute to the shutdown or mothballing of 2 many additional generating units, further hurting 3 local economies and increasing New York's 4 unemployment. 5 There's been a lot of interest about the 6 mothballing process, and what's been going on with 7 our Dunkirk facility. I would like to make a few 8 comments about that. 9 On March 13th, NRG filed what is commonly 10 referred to as a "mothball notice" for the Dunkirk 11 facility with the New York Public Service 12 Commission. 13 This notice was the culmination of several 14 months' work in analyzing the economics of this 15 facility. 16 The bottom line, was that Dunkirk was losing 17 a significant amount of money, and that trend is 18 expected to last for the next few years. 19 The drivers for this poor economic outlook 20 are low natural gas prices, low wholesale energy and 21 capacity prices, and the high fixed costs of the 22 Dunkirk facility, which is similar to all coal 23 generators. 24 The mothball notice, contrasted with the 25 retirement notice, does not preclude Dunkirk from 1 returning to service should natural gas prices rise 2 and energy and capacity prices support bringing the 3 plant back. 4 The conclusion of NRG's filing with the 5 Public Service Commission, was that two of the units 6 at Dunkirk are needed for reliability for a period 7 of nine months, and one of those two units may be 8 needed for an additional two years. 9 These reliability agreements may actually 10 form a bridge from the old Dunkirk units to the new 11 natural gas combined-cycle facility I discussed 12 earlier. 13 Under this scenario, the units under the 14 reliability agreements would keep part of the 15 Dunkirk facility in operation, providing power, 16 jobs, and taxes, and other economic activity to the 17 community in the near term. The new natural gas 18 combined-cycle facility would be developed after the 19 award of a long-term contract, potentially through 20 the Governor's Energy Highway Task Force. 21 The end result would be a facility fully 22 transitioned from coal to natural gas, while 23 continuing in operation, continuing to employ 24 people, and continuing to pay property taxes and to 25 support the community. 1 To get to the current reliability agreement, 2 National Grid and NRG entered into an agreement for 3 Dunkirk Units 1 and 2, for the period of 4 September 2012 through May 31st of 2013. 5 As of early September, Dunkirk Units 3 and 4 6 were taken out of the market and are currently being 7 mothballed. 8 As a result, NRG has been working with 9 IBEW Local 97 on reducing staff responsibly at 10 Dunkirk. At this time, there are no layoffs 11 anticipated. 12 Regarding the PILOT agreement with 13 Chautauqua County IDA and the taxing jurisdictions, 14 NRG is currently making payments consistent with the 15 PILOT agreement. Reductions to the PILOT agreement 16 are not expected until 2014. 17 We have seen other companies file similar 18 mothball notices throughout New York for what we 19 suspect are, essentially, the same reasons. 20 NRG's other coal facility, Huntley Power 21 Station in Tonawanda, also faces economic -- 22 challenging economic situation, and we continue to 23 look for ways to improve the competitiveness of both 24 Huntley and NRG's Oswego oil facility in the 25 wholesale market. 1 What differentiates Oswego from our coal 2 plants, is it has lower fixed-cost structure and a 3 very large capacity value; however, we must continue 4 to reduce our operating costs there as well in order 5 to be viable in the long-term. 6 I'm just going to have a few conclusions, and 7 then I'll sum up. 8 Regarding the energy needs of the state, 9 including Western New York, Senator Maziarz 10 championed the development of the law for the 11 Recharge New York Program and the re-enactment of 12 the Article 10 power-plant siting law, breaking many 13 years of gridlock on both issues. 14 Additionally, during the State budget 15 process, Senator Maziarz, the Committee, and the 16 Senate colleagues continuously guarded against 17 increased taxes and fees on the energy industry, 18 and, importantly, on their impact to Connecticut 19 consumers. 20 Additionally, the Senator has announced 21 several bills designed to help address the state's 22 economy and future energy needs. 23 We need to capitalize on opportunities to 24 revitalize New York State's economy from the inside 25 out, and I would like to thank Senator Maziarz and 1 the Committee, once again, for demonstrating this 2 commitment to the best interests of New York through 3 this legislation. 4 And, in particular, Senate 7391, which you 5 already mentioned, would limit the use of eminent 6 domain only to activities that achieve public-use 7 benefit or purpose that maximizes benefits to 8 New York State. 9 This legislation prevents outside entities 10 from using eminent domain to access our waterways, 11 land rights-of-way, and ultimately, take unfair 12 advantage of New York ratepayers. 13 Additionally, the following proposals will 14 similarly assist with the repowering of New York's 15 existing generation infrastructure, which will 16 provide significant local and state jobs and 17 economic benefits: 18 The Excelsior Jobs Credits program, which 19 supports generation jobs through allowing power 20 plants to access the Excelsior job credits; 21 Clean-fuel repowering tax credit, generation 22 facilities that meet the environmental standards 23 established in the 2011 Power New York Act would be 24 eligible to take at least a 12.5 percent tax credit 25 on necessary improvements; 1 And, finally, low-interest debt financing. 2 This program allows repowering projects that meet 3 strict environmental standards to access 4 low-interest debt financing though the State of 5 New York. 6 It is important to note that the most cost -- 7 the most effective means to getting power plants in 8 New York repowered is to issue long-term contracts. 9 Investors and banks currently want to see 10 revenue streams for these $400-plus million projects 11 in energy infrastructure. Tax credits and 12 low-interest financing go a long way to lowering the 13 overall costs of these projects and, thus, lessening 14 the impact to the markets and ratepayers. 15 Long-term contracts ensure that developers 16 can get financing, which is the key to getting steel 17 in the ground. 18 And, thank you for the opportunity to speak 19 here today, and I would be happy to take any 20 questions. 21 SENATOR MAZIARZ: Well, thank you very much, 22 Mr. Long. We appreciate your testimony here 23 today, and much of it was right on point. 24 I have just a couple of questions regarding 25 the two Western New York plants, Huntley and 1 Dunkirk. 2 And I know that if Senator Young were here, I 3 know Senator Young has worked diligently with the 4 Governor's Office, with yourself, on the issues 5 involving -- particularly involving Dunkirk, but of 6 all upstate generators. 7 But, I just want to clarify what you said. 8 Basically, your application to mothball 9 Dunkirk is only a transitional direction, let's say, 10 to transform Dunkirk from a coal-fired plant over to 11 a natural gas-fire plant. 12 So, it's not about closing Dunkirk and 13 mothballing it permanently. 14 Is that an accurate assessment? 15 RAYMOND LONG: Let me -- let me put it in my 16 words, Senator, and see if this makes sense. 17 SENATOR MAZIARZ: Okay. 18 RAYMOND LONG: The decision to mothball 19 Dunkirk in the proceeding that we went through with 20 the Commission was based on the economics of the 21 facility now, and the decision was based solely on 22 those economics. 23 The decision to mothball, rather than to 24 retire, was based on our belief that, ultimately, 25 natural gas prices will rise, or equalize, depending 1 on how you look at it, providing the potential 2 opportunity to bring those units back. 3 Separately from that, was the proposal that I 4 mentioned to the -- that we made in the response to 5 the Governor's Energy Highway Task Force. 6 That proposal involves building a natural gas 7 line into the existing facility now, and then 8 building the new natural gas combined-cycle facility 9 on site. 10 Both of those initiatives are contingent on 11 having some sort of a financing mechanism, a 12 long-term contract, to move forward. 13 SENATOR MAZIARZ: Right, right. 14 RAYMOND LONG: So, it -- absent that process 15 and absent a contract or a path forward, the plant 16 will stay in mothball, and then, hopefully, come 17 back when prices equalize. 18 SENATOR MAZIARZ: Thank you. 19 The other question was about Huntley. 20 You know, the perception of Huntley is -- and 21 I grew up in north Tonawanda, right across the 22 river. You know, I remember the Huntley plant when 23 I was a young kid. 24 The perception is that Huntley is an old 25 plant; and, therefore, that it's not very 1 environmentally efficient, and that NRG may be 2 looking for a pathway to close Huntley. 3 And that is not the case at all, is it? 4 RAYMOND LONG: No, Senator. 5 You know, we -- when we were going through 6 this process at Dunkirk, we were, at the same time, 7 naturally, looking at all of our plants, and how 8 economically viable they all are. 9 Clearly, both coal plants are financially 10 distressed right now. Huntley just a little less so 11 than Dunkirk at this time. 12 So, in our vision, it didn't make sense at 13 that time to file a mothball notice for Huntley 14 either. 15 So, no, our intent is not -- 16 SENATOR MAZIARZ: Huntley, right now, meets 17 every environmental, every DEC, standard? 18 RAYMOND LONG: Yes, it does. 19 And to your point, Senator, and as I 20 mentioned in my testimony, at both of those 21 facilities, within the last three years, we invested 22 200 million at Dunkirk, 200 million at Huntley, put 23 on all the back-end emission controls that were 24 required. 25 These are among the cleanest plants in the -- 1 coal plants in the country right now. 2 If natural gas prices hadn't dipped down, 3 coal plants would still be more viable. 4 SENATOR MAZIARZ: Thank you. 5 Senator Ritchie? 6 SENATOR RITCHIE: Just a couple of questions. 7 If those two projects aren't pursued, what 8 will that do to the grid if they're not pursued in 9 that area? 10 RAYMOND LONG: In other words, if -- at the 11 Dunkirk project that I mentioned, if we don't pursue 12 it, it's hard to say what will ultimately happen. 13 As the Senator mentioned, our intent is not 14 to close either plant. 15 We could have filed retirement notices to do 16 that, and we chose to file mothball notices instead, 17 believing that the markets will equalize. 18 Assuming that the markets equalize at some 19 point in the future, we'll reevaluate and, 20 potentially, bring those units back at that time. 21 SENATOR RITCHIE: And you mentioned the 22 Oswego plant. 23 Could you tell me what challenges you have 24 there? 25 RAYMOND LONG: It's essentially the same 1 thing. You know, it's what we're all dealing with: 2 Looking at fixed costs of our facilities. Looking 3 at where capacity markets are at -- wholesale 4 capacity markets are at. 5 The difference between Oswego -- quite 6 frankly, the plain difference between Oswego and our 7 coal units, is it has much lower fixed costs at 8 those facilities. The economics are just completely 9 different there than they are at Huntley or Dunkirk. 10 SENATOR RITCHIE: Thank you. 11 RAYMOND LONG: Thank you. 12 SENATOR MAZIARZ: Senator? 13 SENATOR O'MARA: Maybe I missed it, but what 14 is the -- your projected expense for converting the 15 Dunkirk facility to natural gas? 16 RAYMOND LONG: Just the natural gas 17 conversion will be under $20 million. 18 I don't have an exact figure for you right 19 now, but we think 20 million is the absolute high 20 end of what the conversion would cost. 21 SENATOR O'MARA: Okay. And what do you think 22 the price of gas needs to be to make that viable for 23 you? 24 RAYMOND LONG: We think that, right now, the 25 benefits to converting to natural gas are in 1 existence now. 2 With gas prices being as low as they are, it 3 would provide that -- those units that were 4 converted the opportunity to co-fire natural gas 5 with coal, giving it a distinct economic advantage 6 over where it's at now. 7 So, we think the opportunity is there now, 8 Senator. 9 SENATOR O'MARA: Now, at your facilities, do 10 you have a PILOT in place for each facility for the 11 real-property tax payments? 12 RAYMOND LONG: We do, yes. 13 SENATOR O'MARA: And at Dunkirk, I think you 14 mentioned that you wouldn't be looking at any PILOT 15 reductions until 2014? 16 RAYMOND LONG: Yes. 17 SENATOR O'MARA: Now, what would come into 18 play at that time that might affect your PILOT 19 payments? 20 RAYMOND LONG: The -- at -- our PILOT at 21 Dunkirk specifically stipulates that if the -- if 22 units close at the plant, that the PILOT would be -- 23 the PILOT amount would be reduced on a percentage 24 basis commensurate with the closures of those units. 25 In 2000 -- 2014 taxable year is the next 1 opportunity we have, under the payment schedule, to 2 reduce the amount that we pay, based on the 3 mothballing of the two units that I mentioned. 4 SENATOR O'MARA: All right, and can you tell 5 us what that change might be? 6 What you're paying now to the communities, 7 and what you would be paying with the reduction in 8 2014? 9 RAYMOND LONG: I have the numbers, Senator. 10 I didn't bring them with me today. 11 I'd be happy to follow up with you, Senator, 12 and provide those to you. 13 I can tell you that it's -- the two units 14 that are under agreement with the public -- with the 15 Public Service Commission now, are less than 16 50 percent of the output of the facility. 17 So if the -- the rough reductions would be 18 more than 50 percent. 19 SENATOR O'MARA: Okay. 20 RAYMOND LONG: And I will get you those 21 numbers. 22 SENATOR O'MARA: And do you know as to where 23 your PILOT stands in relation to what a 100 percent 24 taxation would be without that? 25 RAYMOND LONG: I don't know. 1 SENATOR O'MARA: No? 2 RAYMOND LONG: I can get that for you as 3 well. 4 SENATOR O'MARA: All right. 5 Do you have similar reduction periods for the 6 other facilities that might come into play like the 7 Dunkirk scenario? 8 RAYMOND LONG: I don't believe -- I don't 9 believe that the Huntley PILOT has that same 10 reduction stipulation in it. 11 I will check on that as well. 12 SENATOR O'MARA: Thank you. 13 Thank you. 14 SENATOR MAZIARZ: Assemblywoman Corwin? 15 SENATOR RITCHIE: I have just a quick 16 question. 17 You didn't talk too much about RGGI, or the 18 impact that RGGI's had on your business. 19 Can you just talk a little bit about what 20 your experience has been, and how that's impacted 21 your energy costs, and the problems that you're 22 having? 23 RAYMOND LONG: To be honest with you, I have 24 not spent a lot of time on RGGI. 25 I can tell you, I know that some of the folks 1 who are coming behind me are planning on speaking 2 specifically about RGGI. 3 I can provide you with some follow-up 4 information, where -- what our company's position on 5 it is. But -- 6 SENATOR RITCHIE: All right, that would be 7 fine. Thank you. 8 RAYMOND LONG: Thank you. I appreciate it. 9 SENATOR MAZIARZ: Thank you very much, 10 Mr. Long. 11 We appreciate that, and we appreciate the 12 business that NRG is invested in New York. 13 RAYMOND LONG: Thank you. 14 SENATOR MAZIARZ: Thank you. 15 RAYMOND LONG: Thank you all. 16 SENATOR MAZIARZ: Our next testimony is, 17 Jerry Goodenough, the plant manager of the Somerset 18 plant. 19 JERRY GOODENOUGH: Good afternoon, Senator. 20 SENATOR MAZIARZ: Good afternoon, Jerry. 21 JERRY GOODENOUGH: Thank you very much, and I 22 sincerely appreciate the opportunity to talk to you 23 about my businesses and about energy policy. I 24 think you're going to find that I'm passionate about 25 both. 1 I have written testimony, I've given you a 2 bio of myself, some facts and information concerning 3 the businesses. 4 I could echo a lot of the comments that my 5 colleague Mr. Long made ahead of me, as far as 6 jobs and economics locally. I think this town knows 7 the impact of this plant locally. 8 I would like to spend my time today talking, 9 and echoing some of your opening comments, Senator. 10 They were spot on as far as what our businesses are 11 facing currently. 12 The decisions that you and your colleagues 13 are going to have to make down the road on energy 14 policy are going to be all about balancing issues; 15 issues that are emotional to some folks, very hot 16 topics. In fact, some folks would like to turn 17 these issues and unbalance the equation and make 18 everybody focus on just one particular topic. 19 We need to look at local economic issues, 20 state economic issues. We need to balance the 21 environment, we need to balance reliability and 22 performance of the units. 23 I hope today the information that we all are 24 going to provide to you will help you with these 25 decisions. 1 I'm going to talk about four or five 2 different issues facing the businesses today, some 3 current programs and regulations, some initiatives 4 down the road, and then, a project that I would like 5 to talk to you about currently at Somerset. 6 Each time I talk about these issues, I want 7 to go back to this theme of: Do they balance 8 everything that we need to look at? Are they 9 balancing economics, environmental, the reliability 10 of the system properly? 11 First conversation I would like to have 12 revolves around the plants that I run, and the 13 decisions we've made to balance those issues. 14 I've been lucky enough to work at the 15 facilities for 24 years of my career, in various 16 different aspects of the job. We've had three 17 different ownerships. 18 Throughout the history I've been there, 19 ownership has been very concerned about the 20 stakeholder relationships we have with our 21 shareholders, with the local districts, with the 22 environment. 23 Fortunately, ownership has invested tens of 24 millions of dollars into these plants, well ahead of 25 any required regulations. 1 It's very interesting to me, the dynamic and 2 the passion behind the folks running these plants 3 for the environment. 4 I've got a quick story. 5 Four weeks ago, I had a tour at Somerset, you 6 know, right next door here. And, we walked in with 7 the tour, into the control room, and I could 8 immediately tell something was going on. I saw the 9 emotion on the folks' face running the plant. 10 When the tour left, I came back, and I said, 11 "What's going on?" 12 We happened to be doing a rata that day. 13 It's a test. That, an outside firm comes in 14 to test the accuracy of the emissions-monitoring 15 equipment. They need to measure the same numbers 16 that we're measuring. 17 We were failing that rata. That's not good. 18 And I said: What's going on? You know, 19 we're tight. You know, we have state-of-the-art 20 equipment. What's happening? 21 And they said: The test folks can't measure 22 the mercury in our stack. We have no mercury going 23 up the stack, their instruments don't go low enough. 24 We've actually had to back off the controls 25 we're using in order to produce the mercury so that 1 we can pass this test. 2 So, two interesting things there: 3 One is, to show -- we only put about 4 10 pounds, to 11 pounds, of mercury a year out of 5 this facility. It is one of the cleanest facilities 6 in the state. 7 But second of all, these guys, they only had 8 to do this for three hours. And they were 9 concerned, that for three hours, they were turning 10 down the equipment. 11 That's how passionate they are about 12 balancing the environment and the decisions we make. 13 We get that. We understand what it takes. 14 What we don't understand, is how there's 15 plants inside New York's borders that don't have to 16 follow those same rules. 17 There are plants running today that are less 18 economic than the plants I run, that are way less 19 environmentally friendly, that are allowed to run 20 under exemptions from DEC and EPA. These are air 21 exemptions and water exemptions, and we just don't 22 understand that. 23 Senator Maziarz, I very much appreciate your 24 opening remarks bringing that subject up. 25 The next subject I want to talk to, about 1 current regulations. 2 And, Assemblywoman Corwin, I'm glad you asked 3 that question on RGGI. 4 I don't think we should be here today 5 discussing the merits of CO2 regulation. That takes 6 scientists and a bunch of other folks, but I do want 7 to talk about this program. 8 There is some underlying outcomes of this 9 program that some folks may not realize. 10 So, the RGGI adder, just for the plants I 11 run, for the year 2011, we represented 13 percent of 12 their revenue brought into New York. Just two 13 facilities. Somerset alone is 10 percent. 14 So, it is a big burden to these businesses. 15 What happens is, that that causes these plants to 16 run less. It's part of the dispatch costs. 17 Now, certainly, the driver right now is 18 natural gas, and the low prices we're seeing. 19 However, the CO2 adder is also hurting these plants; 20 therefore, there's less energy produced inside of 21 New York; therefore, imports are increased, imports 22 from plants outside of New York that do not 23 participate in this particular program. These 24 plants are less economic than the plants I run, and 25 they're less environmentally friendly. So not only 1 are they running, but they've increased in their 2 capacity. They do not have scrubbers, they do not 3 have SCRs, so, actually, emissions are increasing 4 as a result of this program. 5 So I again echo your comments, this is not a 6 good program. 7 I believe at a minimum, if we go back and we 8 look at, "Are we balancing the equation correctly, 9 looking at the environment, looking at economics, 10 looking at reliability, looking at what's best for 11 New York State?" this program does not do the 12 balance. We need to levelize that playing field. 13 And I've also been an advocate, believe it or 14 not, maybe one of the few coal plants out there, 15 that this needs to be a federal program, so that all 16 states are involved in this program. 17 The next initiative I would like to discuss, 18 I don't think I need to spend a lot of time on. I 19 mean, the board that you've put up, discussing 20 the -- or advocate -- or, not advocating for the 21 Central Hudson-Champlain project, is enough said. 22 I also echo your comments, that I don't 23 understand how this particular project could still 24 be put forth in New York. It doesn't add jobs, we 25 can't connect to it. It's just -- it's not good 1 business for New York. 2 And I appreciate the fact that you've all 3 been out in front, of educating folks on how this 4 isn't a good program for New York. 5 The initiative put forth by the Governor, the 6 "energy highway," that makes a lot of sense. 7 You mentioned earlier that we don't have a 8 generation problem in New York. We have a 9 transmission problem. 10 That's perfect. That's what we have. We 11 need to fix that. 12 If we can get that fixed; if we can update, 13 and add to the aged transmission system, not only 14 does that allow local business in Western New York 15 to compete at -- with environmentally friendly 16 projects, lower economics, send electricity down to 17 New York, but it also opens up the avenue for the 18 untapped renewables that are in Western New York. 19 We can help with the renewable-portfolio 20 standard put through by the Governor. It -- it adds 21 jobs, it keeps the money local. It's a good piece 22 of legislation to get behind. 23 And I appreciate the efforts of all of you 24 getting behind that. 25 Taking a look at the plants that I run, going 1 back to the equation of balancing all the -- all the 2 issues in front of us, we realize, that no matter 3 how hard we work at reducing costs, at increasing 4 our performance, at getting better coal deals, at 5 getting better rail deals, that there's outside 6 forces acting on this business that we can't control 7 to keep things moving forward. 8 We echo the Governor's comments that he put 9 out in the summer, indicating that there is indeed a 10 gap of time that is currently present in the energy 11 grid that renewables can't fill. 12 His proposal was to fill that gap with, 13 purely, just natural gas plants. 14 I get the momentum behind natural gas. It's 15 low cost, it's plentiful. 16 I'm very concerned about fuel diversity. 17 You know, if you sit down with your portfolio 18 manager, and you tell him you're going to invest in 19 just one particular stock or bond, or in just cash, 20 he's going to just shake his head. 21 And that's the same investments we need to 22 make in New York. We cannot invest in just one fuel 23 source. We need to keep the diversity structure 24 that's been set up in New York, something that we've 25 all been proud of, alive and well. 1 What the -- the proposal I have for the 2 project at Somerset, is a project that we've worked 3 hard, as a community, to promote. 4 I want to digress real quick again, and just 5 mention, Dan Engert and John Syracuse, and their 6 leadership that they've provided locally. 7 This community has gone through some very 8 difficult times. This community has learned the 9 hard way that they are part of this business. 10 There was some tension a few years ago. 11 Dan and John fought their way through that 12 tension, and fully understand how this business 13 impacts this community. And, they've had to make 14 some hard decisions, but it's worked. 15 And now they have a group of folks in this 16 community that want to help this business. They 17 want to see it survive. 18 They've been working with the plant manager 19 at this particular site, Jack White. They're on a 20 regional sustainable council. 21 We've been working with the local union 22 leadership. 23 And we've gotten behind a project that we 24 feel is a good mix for the Somerset plant: We'd 25 like to add a biomass facility to the plant. 1 This particular region thrives on the 2 energy-production industry and the agricultural 3 industry, and this is an excellent balance for both 4 of them. 5 Farmers are behind this project. We have 6 folks that will help us -- will have helped us to 7 develop the economic model for the capital. 8 We've done these projects before. 9 I've been involved with a plant on 10 Seneca Lake, Greenwich Station. We did biomass 11 there. It worked well. We fired up to 10 percent 12 of the megawatts with biomass product. We know how 13 to do this. 14 The funding for a project like this would not 15 nearly be the size needed for a full natural gas 16 conversion. 17 I understand, Senator, the topic of the 18 moment is to really look at natural gas conversion. 19 And I've spent a lot of time doing that. 20 The economics aren't necessarily viable right 21 now to do that, but I'm not opposed to a project 22 like that. I just think, right now, this biomass 23 project fits better. Plus, it protects the 24 diversity of coal, going forward. 25 I cannot foresee this grid having 60, 70, 1 80 percent fired natural gas, whatever number we're 2 striving for, and then the gas staying at 3 two and a half dollars. 4 I think we'd be in a very big economic bind 5 if we got there, and we did not have fuel 6 diversification left. 7 We think we can get this funded through 8 programs like the renewable energy credits that 9 NYSERDA offers. 10 We did win an auction earlier on in the 11 Greenwich project. We know how to compete in that. 12 We feel we can get some NYSERDA funding. 13 And what I'd also like to promote, is, I feel 14 like we should get some of the RGGI funding back 15 into this district. We've spent over $35 million 16 just on the RGGI tax, and I feel like we should get 17 some of that back in, for green jobs, for green 18 programs, in this district. 19 I want to just finish my comments, and then 20 open up for questions. 21 The lack of a structured energy policy, going 22 forward, has not necessarily helped any of us invest 23 lately. 24 You guys have a tough job in front of you to 25 try to put some clarity to that. 1 I would advocate that you continue to look 2 and balance all the issues that were faced: local 3 economic, state economics, the environment, the 4 reliability of the grid. 5 I'm sure you also have to balance all the 6 political issues associated with that. 7 I struggle with that a little myself, but I'm 8 starting to learn that that's also an important 9 factor. 10 And, if you have comments, questions, if you 11 need to reach out for any knowledge base, you know, 12 I'm there to help. 13 This community understands what they need to 14 do to help out. 15 And, we're all advocates for this. 16 SENATOR MAZIARZ: All right, thank you very 17 much, Jerry. 18 JERRY GOODENOUGH: Yes, sir. 19 SENATOR MAZIARZ: We appreciate you being 20 here today. 21 What are the current employment levels at 22 Somerset right now? 23 JERRY GOODENOUGH: Somerset is just under 24 100 folks. Around 97. That's a combination of IBEW 25 and salaried people. 1 SENATOR MAZIARZ: Okay. 2 And I asked this question of the previous -- 3 the previous speaker. 4 Somerset currently, I assume, meets or 5 exceeds every federal or state -- 6 JERRY GOODENOUGH: Yes. 7 SENATOR MAZIARZ: -- DEC, EPA, standard? 8 JERRY GOODENOUGH: Yes. 9 SENATOR MAZIARZ: And has for some time. 10 What -- 11 JERRY GOODENOUGH: Has for some time. 12 And, with one small tweaking of a piece of 13 equipment, we feel we can meet all future regs that 14 have been put out there. 15 SENATOR MAZIARZ: What's been the total 16 investment by the -- I realize the current owners 17 only owned it for a very short period of time, but, 18 by AES before that, let's say, in the last, five, 19 six years. 20 JERRY GOODENOUGH: Environmentally, in the 21 last, five, six years, it's been over $25 million. 22 SENATOR MAZIARZ: $25 million? 23 JERRY GOODENOUGH: Yes. 24 And, remember, this plant was built with an 25 FGD in the mid-'80s. 1 SENATOR MAZIARZ: Right. And I trust that 2 all that work has been done by local -- 3 JERRY GOODENOUGH: Yes. 4 SENATOR MAZIARZ: -- local -- 5 JERRY GOODENOUGH: Yep, local workers, local 6 vendors. 7 This plant, when it was running and outage 8 time was a premium, so, you'd tried to work the 9 outage around the clock, seven days a week, would 10 employ up to 600 to 700 contractors. 11 Now, employing that many contractors, some of 12 them weren't local, but, we exhausted the local 13 bench before we would go out. 14 SENATOR MAZIARZ: Right. 15 I just asked that question, because I knew 16 the answer, but I just wanted to make sure that 17 everybody here from throughout the state know of 18 what a great -- what a great citizen you've been, 19 and your company has been, and continues to be, here 20 in Niagara County. 21 And I know, it was very important that you 22 mentioned Supervisor Engert and, also, 23 County Legislator John Syracuse. 24 You are absolutely right. They did an 25 outstanding job fighting for the survival of this 1 plant. 2 JERRY GOODENOUGH: Yeah. And just to echo, I 3 kind of left out, but we have been working very hard 4 with union leadership as well. 5 SENATOR MAZIARZ: Yes. 6 JERRY GOODENOUGH: It's interesting to see 7 everybody come together for a common cause. 8 SENATOR MAZIARZ: And they are going to be 9 testifying later on in the hearing, the union. The 10 IBEW Local 966 are going to be testifying later on 11 in the hearing. 12 JERRY GOODENOUGH: Excellent. 13 SENATOR MAZIARZ: And I thought your rather 14 judicious use of the word "tension" was very good. 15 [Laughter.] 16 SENATOR MAZIARZ: With that, I'll turn it 17 over to Senator Ritchie. 18 SENATOR RITCHIE: In your particular 19 situation, you mentioned that we need to level the 20 playing field. 21 Can you elaborate on what you see 22 New York State needs to do to level the playing 23 field? 24 JERRY GOODENOUGH: I would concentrate on 25 continued look at fuel diversity. 1 I would concentrate on all plants within 2 New York following the same environmental 3 regulations. That's air emissions, NOx control, 4 316(b) water regs. There should be no exemption for 5 any plants. 6 I would continue to focus on projects that 7 enhance the plants, as far as, you know, keeping the 8 local jobs, and, becoming more environmentally 9 friendly. 10 SENATOR RITCHIE: And just one last question: 11 Do you know what the economic impact would be on -- 12 the biomass facility would have on the agricultural 13 business here in this part of the state? 14 JERRY GOODENOUGH: I can't give you numbers, 15 but we have talked to local farmers who sell crops 16 for a living, and they're very excited about the 17 project. 18 We have worked with, same job, different 19 owner. 20 We've worked with Morrisville. We've worked 21 with SUNY Buffalo. We've worked with Cornell. 22 These guys are -- they're freaks, for a better name. 23 These guys love building the switch grass. They 24 want to build it, it's like switch grass on 25 steroids. They want to build it with more BTUs. 1 They're trying to get three, they're trying to get 2 four, cuttings a year. 3 It's very exciting for these guys. 4 And the farmers are looking forward to trying 5 to work together with us. 6 SENATOR RITCHIE: Thank you. 7 SENATOR MAZIARZ: Senator O'Mara? 8 SENATOR O'MARA: Yes, thank you. 9 Thank you for your testimony. And I just 10 want to let you know I very much appreciate your 11 comments on the need for fuel diversity in our 12 state, and in our country, for our security, and for 13 the balancing of the economies as they -- the 14 various costs adjust throughout that. 15 My district includes Ithaca, so, right next 16 to your Lansing plant that you've acquired. 17 Can you give me a little bit of information 18 on where you stand in the Cayuga facility, as far as 19 what you're up against there? 20 JERRY GOODENOUGH: Yeah, so, I had a little 21 smirk on my face. 22 So, you understand fracking if you have 23 Ithaca. 24 SENATOR O'MARA: And the Southern Tier, and 25 sort of half the Finger Lakes. I understand it very 1 well. 2 [Laughter.] 3 JERRY GOODENOUGH: So, uhm -- 4 SENATOR O'MARA: Let's not go there today. 5 [Laughter.] 6 JERRY GOODENOUGH: Yes. 7 [Laughter.] 8 JERRY GOODENOUGH: Yes. 9 It's very interesting. 10 So, the same issues that faced Somerset, as 11 far as getting folks to understand what your 12 business is all about, we faced in Ithaca. The same 13 type tension and push back, initially. 14 The community of Ithaca now is very 15 supportive of this business. They are behind it. 16 There are two folks that sit on regional 17 councils there, and one of them is constantly 18 calling me, e-mailing me: Hey, have you tried this 19 idea? Are you looked at biomass there? Have you 20 tried...? 21 We've looked at algae. We've looked at 22 Enviro-Cubes. 23 You know, they're very supportive of, What 24 can we do to enhance the profile of that particular 25 plant? 1 SENATOR O'MARA: Do you burn hydrilla? 2 That's an issue in Ithaca too. 3 JERRY GOODENOUGH: Uhm -- 4 SENATOR O'MARA: It's a very heavy supply 5 source, I think, if you can get it to convert. 6 JERRY GOODENOUGH: We haven't looked at 7 hydrilla. However, if you're familiar with the 8 area, you know they have a problem with the dregs in 9 the lake. And we've actually looked at trying to 10 put them on our particular landfill. 11 One thing that we haven't talked about is -- 12 is looking for wells on our property. 13 SENATOR O'MARA: Now, what is the fuel source 14 currently at Lansing? 15 JERRY GOODENOUGH: It's 100 percent coal. 16 SENATOR O'MARA: And -- 17 JERRY GOODENOUGH: And, again, the same clean 18 technologies at this particular plant. They have an 19 FGD, they have an FCR, and they have low-NOx 20 burners. 21 SENATOR O'MARA: Okay. 22 You acquired both of these plants from AES. 23 Did you acquire the facility in Dresden? 24 JERRY GOODENOUGH: No, sir. 25 Out of -- AES, Eastern Energy was made up of 1 six facilities, the old NYSEG facilities. 2 When we filed for bankruptcy, all 3 six facilities filed. 4 Coming out of bankruptcy, Somerset and Cayuga 5 were acquired by the bondholders, and that's the 6 current business structure that I run. 7 SENATOR O'MARA: Thank you. 8 JERRY GOODENOUGH: Thank you. 9 SENATOR MAZIARZ: Assemblywoman Corwin? 10 ASSEMBLYWOMAN CORWIN: Thank you very much. 11 Actually, most of the questions were already 12 asked and answered, and, thank you very much. 13 I just want to make a comment. 14 I was in the Somerset plant recently, and I 15 can tell you, it's an incredible facility. 16 Extremely competent people at the helm, tremendous 17 efficiency, cleanliness, security. 18 It really was a very impressive operation. 19 JERRY GOODENOUGH: Thank you. 20 ASSEMBLYWOMAN CORWIN: I think you're doing a 21 great job there, and especially given the economic 22 considerations that we've been discussing. 23 Getting back to RGGI. I can't leave the RGGI 24 issue. 25 You say that the Somerset plant alone had 1 $35 million in additional -- 2 JERRY GOODENOUGH: That was Somerset and 3 Cayuga combined, the facilities I run. 4 ASSEMBLYWOMAN CORWIN: Okay, and that's 5 associated with RGGI, and our participation in the 6 RGGI program. 7 Let's say, hypothetically, we're not in the 8 RGGI program. 9 How would that impact your operations, and 10 what would -- what would that do to the way you do 11 business? 12 JERRY GOODENOUGH: Our -- okay, there's -- 13 there's two points I want to make on this. 14 How would this affect our operations? We. 15 Would become more economic. 16 RGGI is thrown right into our dispatch costs, 17 so it's an adder, so it keeps us out of the market 18 at times. So, we would have run more. 19 Second, that $35 million would have been 20 poured back into the plant, and the local community. 21 We too had to renegotiate our PILOT. 22 Folks here locally know a lot about our 23 financials. We shared a lot. 24 $35 million, or, in particular, Somerset's 25 portion, is more like $25 million. Would have made 1 the plant more valuable. Probably would have 2 increased our PILOT payments. 3 ASSEMBLYWOMAN CORWIN: Great. Thank you very 4 much. 5 JERRY GOODENOUGH: Thank you. 6 SENATOR MAZIARZ: Thank you very much, Jerry. 7 We appreciate your testimony here today. 8 Thank you. 9 JERRY GOODENOUGH: Thanks for your time. 10 SENATOR MAZIARZ: Our next witness is 11 Dan Engert, the supervisor of the town of Somerset. 12 And, again, Dan we just wanted to express our 13 appreciation for you allowing us to use these 14 facilities here today. 15 DANIEL M. ENGERT: We're glad that you're 16 here. 17 Unlike Jerry, I'm going to stick to my 18 written testimony script, in the interest of time, 19 so I don't get off track. 20 This is a passionate subject for me, and for 21 our community, and so I'll stick with my written 22 testimony, if you don't mind. 23 SENATOR MAZIARZ: Thank you. 24 DANIEL M. ENGERT: You know me well enough, 25 Senator. 1 SENATOR MAZIARZ: Yes. 2 DANIEL M. ENGERT: You'd like to be out by 3 four, I presume. 4 [Laughter.] 5 DANIEL M. ENGERT: My name is Daniel Engert, 6 and I've lived in Upstate New York and 7 Niagara County for all my life. For the vast 8 majority, I've lived right here in Somerset. 9 I'm a husband, and father of four children, 10 all of whom are enrolled and/or have graduated from 11 the Barker Central School District. I myself am a 12 graduate of the Barker Central School District, and 13 of the Niagara County Community College. 14 I'm a public servant, employed as the 15 administrative captain at the Sheriff's Office, and 16 I've served as Town Councilman for the previous 17 four years, and am currently serving in my first 18 term as the elected town supervisor for the town of 19 Somerset. 20 I've led negotiations on behalf of the town 21 for two Payment in Lieu of Tax Agreements, or, 22 "PILOTS," adopted by the Niagara County Industrial 23 Development Agency with the Somerset coal-fired 24 plant within the past three years. 25 I guess that's a long way of putting that I'm 1 a layman, but, I represent a lot of people and a lot 2 of interests here. 3 I'm especially grateful that you have 4 convened this hearing within your district and in 5 the town of Somerset. 6 And on behalf of the town, I welcome you and 7 your esteemed colleagues. 8 I would like to begin by thanking you, 9 Senator Maziarz, for inviting me to participate in 10 this hearing of the New York State Senate Committee 11 on Energy and Telecommunications, as you and your 12 colleagues explore the long-term base-load energy 13 generation and transmission needs of the state of 14 New York. 15 You will hear from a number of stakeholders 16 throughout this hearing, and beyond. 17 I'm going to speak to you today in an attempt 18 to highlight for you, the local impact that the 19 coal-fired Somerset facility and others in 20 Western New York have upon our local economy, upon 21 jobs, upon economic development, and upon our 22 ability to deliver basic and essential services to 23 the residents of our community. 24 Most importantly, it is crucial, and 25 critical, that our public policymakers recognize and 1 consider what it would mean to our communities if 2 this facility and others in Western New York were to 3 close. 4 It is my earnest hope and desire that 5 New York State will recognize the significant and 6 important role that coal can and should play in our 7 economy. 8 Speaking initially from a broader 9 Western New York perspective, there are four 10 coal-fired power-generation facilities located here 11 in Niagara, Erie, Tompkins, and Chautauqua Counties, 12 respectively. 13 These power plants in Western New York 14 represent major employment and tax anchors for our 15 communities, with a combined economic impact of more 16 than $500 million per year in taxes, as well as 17 direct and indirect employment. 18 Allow me to get into some of the specific 19 impact issues as they relate to Somerset. 20 The Somerset Operating Company is owned by 21 Upstate New York Power Producers (USNYPP), and was 22 previously operated by AES. 23 The facility is located on Lake Ontario in 24 the town of Somerset. It is a 680-megawatt 25 coal-fired power plant with state-of-the-art 1 environmental-control technology. 2 This facility has been a highly reliable 3 clean and safe source of power for New York for many 4 years. It is a key stakeholder in the local 5 community, providing jobs, large tax payments, 6 commerce traffic, and rail traffic demand. 7 Let me spend a moment discussing the 8 community's economic benefit from this plant. 9 The 97 employees, including 80 union 10 employees of the IBEW Local 966, represent a payroll 11 of $15 million. 12 The facility will contribute more than 13 $52 million in PILOT payments through 2015 to the 14 taxing jurisdictions. They represent 80 percent of 15 the Town tax base, 70 percent of the Barker school 16 tax base, and 5 percent of the entire Niagara County 17 tax base. 18 Let me get into the impact on our school 19 district in a bit more detail. 20 The school will experience a decrease of 21 $7.5 million in revenue over the next two years. 22 The district will be heavily reliant on increased 23 State aid and two additional sources, each of which 24 are vulnerable to the economic conditions and our 25 residents' ability to assume the majority of the 1 shortfall. 2 The first is district revenues. Reserve 3 accounts -- pardon me. 4 The first will be district reserves. 5 Reserves accounts will be completely and quickly 6 depleted. 7 The second is the increase in school taxes. 8 Being among the poorest communities in 9 Niagara County and Western New York, this district 10 and the residents here simply do not have the 11 financial capacity to withstand substantive 12 increases in taxes. 13 The extensive withdrawals of reserve 14 accounts, coupled with increases in school taxes to 15 offset the decreased revenue, are short-term 16 responses to a long-term problem. 17 These areas will only go so far before 18 significant impacts will be realized elsewhere. 19 The sustainability of the Somerset Power 20 Plant is, therefore, directly tied to the district's 21 ability to, not only maintain its status as one of 22 the highest-performing districts in 23 Western New York, but also to fulfill its basic 24 mission: to successfully prepare Barker students for 25 success in both college and career. 1 Furthermore, on to the economic benefits to 2 the community: 3 The facility contributes to more than 4 $6 million in estimated annual indirect and induced 5 local job creation; 6 It generates an estimated $4 million in 7 sales-tax revenue annually, and will generate an 8 additional $70 million in economic activity over the 9 next three years. 10 In total, the community benefit from 11 continued operation at this facility alone exceeds 12 $148 million. 13 I cannot underscore these impacts enough. 14 As you are well aware, the industrial and 15 manufacturing sector in Western New York has 16 declined significantly over the past 20 years, and 17 consequently, the demand for power consumption has 18 left right along with these declining sectors. 19 We have seen countless jobs disappear to 20 other states, once proud and booming manufacturing 21 facilities are closed and shuttered up, and our 22 population has declined consistently over this 23 period as well. 24 Currently, there is a need for energy in the 25 southern part of the state beyond the capabilities 1 of their local generation; and, yet, there are 2 low-cost and reliable plants in the western part of 3 the state that are either idle or not running at 4 full capacity. 5 The Governor has proposed an "energy highway" 6 plan that has the potential to upgrade the aged 7 transmission system running west to east in the 8 state. 9 And, we certainly support our Governor, and 10 encourage the Senate leadership to do whatever is 11 necessary to make this investment a reality. 12 Upgrading the aged transmission system can 13 tie generation facilities within New York to all 14 markets within the state, keeping energy generation 15 homegrown. 16 Another benefit of improving our transmission 17 infrastructure is the ability to fully tap into a 18 renewable expanse potential of wind, solar, and 19 biomass that currently exists in Upstate New York. 20 I can agree with the need to continue to push 21 for projects that produce energy for New York in the 22 form of renewables. However, it is widely accepted 23 that there is a gap that needs to be filled until 24 renewables can support the grid of New York State. 25 Our Western New York power plants have 1 invested hundreds of millions of dollars into the 2 state-of-the-art emission-control equipment in 3 recent years. This investment was done as a 4 commitment to doing business in New York. They are 5 already compliant with the stringent new EPA 6 emission rules that will have hundreds of power 7 plants closing across the country by 2015. 8 The Somerset Operating Company, particularly, 9 is recognized as one of the cleanest facilities in 10 the entire United States. 11 These plants can create energy by combusting 12 clean coal at environmentally compliant, 13 state-of-the art facilities, and they should be used 14 to help fill this gap while maintaining fuel 15 diversity which New York needs to provide its 16 residents and businesses with dependable and 17 affordable energy. 18 I have been closely working with Jack White 19 of Upstate New York Power Producers and the 20 Niagara County Center for Economic Development, to 21 develop a plan that includes adding jobs and local 22 revenue to the economy, while striving to continue 23 to provide environmental benefits from firing coal 24 at the Somerset facility. 25 I am pleased to report to you that plans are 1 currently underway to co-fire biomass here. 2 I hosted a meeting, in conjunction with the 3 Center for Economic Development, earlier this year 4 in Somerset, between agricultural stakeholders, and 5 it was extremely well-received. 6 We have been working through the 7 Western New York Regional Sustainability Plan Energy 8 Working Group, as well as the Agriculture Working 9 Group, to further promote this initiative. 10 Agriculture and electric generation are two 11 primary industries in the local area. 12 A biomass project provides some certainty in 13 the near future for both of these critical local 14 business sectors. 15 The project provides a steady reliable income 16 stream for local agriculture in the growing, 17 harvesting, and delivery of fuel feedstock to the 18 power plant, while the plant reduces CO2 emissions 19 and reduces its consumption of coal. 20 Incentivizing credits for reduced emissions 21 projects will greatly benefit the Somerset facility. 22 Any renewable energy-production project 23 currently in the planning phase rely on subsidies to 24 make the economics work, and this project would fall 25 in the same line. 1 Most energy crop producers want to guarantee 2 their production, and this project would need some 3 incentives to make it worth the effort from the 4 local producers. 5 I also believe that we must recognize that 6 reducing CO2 emissions is a significant objective 7 towards cleaner energy. 8 In January of 2011, President Obama traveled 9 to New York, Schenectady specifically, the 10 birthplace of General Electric, to deliver a speech 11 focusing on growing our economy and creating jobs 12 through clean-energy development. 13 The President announced his appointment of 14 GE CEO Jeffrey Immelt as the chairman of the 15 Council on Jobs and Competitiveness. 16 Along with several other companies, GE is 17 working on developing clean-coal technology projects 18 that can make America more competitive in a global 19 market. 20 And I also believe that the long-term 21 viability of the Somerset facility requires more 22 investment into clean-energy development. 23 Support for and incentivizing technology 24 research, development, and deployment is critical, 25 and offers opportunities for technological advances, 1 economic growth, while reducing costs, and it should 2 not be abandoned at the State level. 3 Expectations of new markets are a key factor 4 in triggering additional private investment and 5 technological innovation. 6 Discussions have recently ensued in Albany 7 regarding the conversion of the Somerset facility to 8 natural gas. 9 While I'm not so sure that this is the best 10 long-term solution for the facility, I also 11 recognize that business decisions can be changed 12 based upon political realities. 13 And like Senator Maziarz, I am a strong 14 believer in the importance of fuel diversity, and I 15 also share his belief that coal should be part of 16 our energy mix. 17 However, if it is a State policy decision to 18 encourage conversion to natural gas, as it appears 19 to be the case, then we need real incentives to make 20 it happen. 21 Senator Maziarz has outlined a plan that 22 makes good sense, because its commitment to a fairer 23 capacity market will allow coal plants to continue 24 to operate in the short term, and the significant 25 incentives it includes for repowering to natural gas 1 will make this a viable option for the future. 2 As Supervisor of the town of Somerset, I am 3 here to tell you that it is vitally important to our 4 community, our economy, and the tax base that 5 generation continues at the Somerset facility. 6 I am open to any form or mix of generation 7 that might be proposed, as long as that plan is 8 realistic, and provides the proper incentives to 9 ensure the long-term viability of this facility. 10 That being said, it is important to note that 11 clean-coal-burning facilities add diversity to the 12 current fuel mixture for New York State. 13 According to current reports from the 14 U.S. Energy Information Administration, coal 15 provides just 7 percent of New York's power, while 16 New York has the fourth highest electricity costs in 17 the entire nation. The average retail price for 18 electricity is 15.94 cents per kilowatt hour. 19 The parallel to me is striking. 20 The affordability of coal in relation to 21 other sources of energy provides businesses with a 22 reliable supply of electricity that can put our 23 economy back on track. 24 In fact, four of the five states in the 25 nation with the lowest retail electricity costs rely 1 upon coal to generate 80 percent or more of their 2 electricity. 3 Frankly, I have been discouraged at the 4 apparent singling out and direct opposition to coal 5 in this state, generally. 6 Given the dependency on coal in our country, 7 coal-fired power generation will remain substantial. 8 It is estimated that it will remain accountable for 9 as much as 39 percent of the power generation in the 10 U.S. by 2035. 11 Citing even our own "New York State Energy 12 Plan 2009" document, coal is recognized as a 13 plentiful domestic resource, and clearly 14 acknowledges that it offers fuel diversity to the 15 state. 16 Calculations based on the current rate of 17 use, it's estimated that the United States has a 18 242-year supply of known recoverable reserves of 19 coal. The U.S. has more reserves of recoverable 20 coal within its borders than any other country. 21 Finding ways to use coal more efficiently 22 promotes greater domestic energy security, which is 23 a critical component to the stability of our 24 economy. 25 New York State cannot afford to develop and 1 implement further policies that directly impact 2 coal-fired generation facilities in such devastating 3 manners. 4 And please allow me to briefly discuss one of 5 the singling-out measures to which I am referring. 6 The participation of New York State in the 7 Regional Greenhouse Gas Initiative program was done 8 so, not through a law, but rather, through an 9 end-around measure designed to avoid an open debate 10 on the merits of that program before the people of 11 this state. 12 The RGGI program has been portrayed as a 13 program that helps the environment. 14 The revenues from this program are derived 15 largely on the backs of ratepayers through special 16 taxes on fossil-fuel-burning power generators. 17 When these revenues are not used to balance 18 the budget, they have helped with renewable-energy 19 projects and energy-efficiency projects. However, 20 the added costs to the ratepayers, and 21 particularly -- "particularly" -- the ratepayer and 22 taxpayers in the communities that are home to these 23 specially taxed generators are enormous. 24 $329 million has already been taken out of 25 the economy in New York due to the required purchase 1 of permits. 2 This burden has also negatively impacted 3 plant-capacity factors for New York plants. 4 As a result, the State has imported 5 electricity from adjacent states that do not 6 participate in RGGI. This imported electricity is 7 generated from facilities that have less stringent 8 environmental limitations than the facilities here 9 in New York. 10 Last year, NYPA signed a power-purchase 11 agreement with plants, including coal-fired plants 12 in New Jersey, to deliver power to New York City. 13 Meanwhile, power generators in New York, and 14 particularly in Western New York, are either closing 15 or struggling mightily to survive, along with the 16 communities in which they reside. 17 Minimally, the Somerset facility has 18 contributed to, it's estimated, 10 percent of the 19 total revenue in the RGGI program. 20 And it would seem reasonable to me that some 21 of this revenue be distributed back to the facility 22 to incentivize renewable-energy programs, such as 23 co-firing with biomass at the plant. 24 And I am very glad to see that 25 Senator Maziarz has included just such an option in 1 his plan for our generation future. 2 I briefly discussed the importation of energy 3 and its negative impact on Western New York. 4 And along those very same lines, I am aware 5 that the Champlain-Hudson Project, a 1,000-megawatt 6 DC line from Québec to New York City, is being 7 proposed as part of the Energy Initiative -- Highway 8 Initiative. 9 Similarly, this ill-fated initiative seeks to 10 take advantage of the transmission congestion that 11 precludes Western New York power producers from 12 getting their product downstate. 13 If implemented by bypassing Western New York 14 generators, it would, quite simply, draw from the 15 resources, the jobs, the communities located in 16 Canada, and most directly benefit them at the 17 expense of New Yorkers. 18 This solution is not good for New Yorkers. 19 If implemented, it would result in the 20 closure of viable plants, the loss of jobs, and huge 21 economic impacts on our communities. 22 And I've talked about those briefly in the 23 first paragraph. 24 These are out-of-state and out-of-country 25 solutions, and they amount to running 1 "extension cords" into New York, further undermining 2 our ability to control our destiny in the energy 3 sector. 4 I applaud Senator Maziarz for his efforts 5 thus far to stave off this very poorly conceived 6 initiative that directly hurts Western New Yorkers. 7 I would like to provide one final comment for 8 your consideration, and I believe it's entirely 9 relevant to this discussion, as it relates to a huge 10 potential energy customer. 11 It is extremely disheartening to me, in that 12 it appears New York State's Empire State 13 Development, privately, and even publicly, at 14 various levels, has pulled the plug, if you will, on 15 one of the most viable opportunities for economic 16 development in Niagara County, and particularly 17 Somerset. 18 I am told by economic development experts in 19 our region who I work with, that ESD has eliminated 20 any real marketing effort to attract data centers 21 anywhere in the state. 22 As you may recall, it was only a short time 23 ago when numerous giants in the industry, such as 24 Yahoo!, Microsoft, Google, and Verizon, were 25 circling our region, and mostly Niagara County, in 1 consideration to invest here and to build large data 2 centers. 3 Yahoo! did ultimately invest in the town of 4 Lockport and built a state-of-the-art data center 5 there. 6 Similar to Quincy, Washington, on the west 7 coast, the communities of Somerset, Niagara County 8 even, the broader Western New York area generally, 9 was poised to become the east coast's data center 10 hub, if you will. 11 Verizon selected Somerset, and by all 12 accounts, the project would have been the single 13 largest economic-development investment in the 14 history of Niagara County. 15 Sadly, certain public-policy interests 16 created a hugely negative public perception of the 17 incentives, and suddenly, the politically correct 18 position became to eliminate pursuing these 19 high-energy consumer investments due to the limited 20 jobs created. 21 I ask you: What sense is made to shun 22 investment and the associated revenue on the 23 premise, that while it produces good-paying jobs, it 24 just doesn't produce enough of them to make sense in 25 a "job-per-incentive calculation"? 1 The "incentive" calculation, or, in other 2 words, "taxes lost," is often misleading, as it 3 makes the critical assumption that the amount of tax 4 exemptions not covered by the PILOTs would be 5 received by the government, in full, were it not for 6 IDA tax breaks. 7 This is not necessarily the case. 8 The tax revenue would only be realized if the 9 project would move forward on the same timetable, at 10 the same scale, and in the same location without the 11 incentives provided. 12 The alternative to this position, of course, 13 is zero investment, zero jobs, and zero revenue to 14 the government. 15 Frankly, in my opinion, the massive push to 16 eliminate IDAs and to latch onto any and all 17 arguments to that end is more to blame for this 18 policy decision than any community-specific 19 analysis. 20 This community, I can tell you, for one, will 21 gladly take whatever revenue results from the 22 incentives, and any number of good jobs that are 23 created at this point. We'll take the half a loaf 24 over no loaf any day. 25 Ironically, this position is especially 1 destructive to the present situation, as the power 2 plants desperately need high-energy consumers who 3 create certainty in terms of their sale of 4 electricity. 5 A large volume of energy users will 6 especially be needed to support the incentives that 7 are being considered for conversion and other 8 renewable investments. 9 A data center in Somerset would ease pressure 10 immediately and provide stability for our future. 11 If at all possible, any attention to require 12 the re-thinking of this apparent policy decision at 13 Empire State Development will go a long way for the 14 interests of Somerset, Niagara County, and 15 Western New York. 16 I appreciate the opportunity to discuss these 17 issues with you today, and to be able to present my 18 perspective on the important issues you've raised. 19 Thank you again for this opportunity, and I 20 would be happy to answer any questions that you may 21 have at this time. 22 SENATOR MAZIARZ: Thank you very much, 23 Supervisor Engert. We appreciate your comments. 24 Just, very briefly, can you outline for us 25 what the total taxes that are paid? 1 I know you and County Legislator 2 John Syracuse did a yeoman's effort in negotiating a 3 PILOT agreement with the plant and the school 4 district and the Town and the County. 5 Could you just outline the specific dollar 6 amounts that the Somerset plant does pay to the 7 County, the Town, and the school district? 8 DANIEL M. ENGERT: Over the next three years, 9 ending in 2015, there will be total PILOT payments 10 of $52 million. 11 SENATOR MAZIARZ: $52 million. 12 The bulk of that would go to the school 13 district, I would presume? 14 DANIEL M. ENGERT: I believe the breakdown 15 is, 59 percent or so to the school, 34 percent to 16 the County, and 8 or 9 percent to the Town. 17 My math is -- 18 SENATOR MAZIARZ: Yeah. 19 DANIEL M. ENGERT: But it's in that range. 20 SENATOR MAZIARZ: Yeah. I believe for the 21 County, I've heard the County Chair -- or, 22 legislative Chairman Ross indicate that if the 23 County did not increase its budget at all -- that -- 24 and if the Somerset plant were to close, that 25 everyone's tax -- everyone -- every county 1 property-owner's tax bill would go up by, anywhere 2 between 7 and 10 percent, without the budget 3 increasing at all for the rate of inflation, or 4 anything else. 5 DANIEL M. ENGERT: That is the -- that was 6 the numbers that John was working through during 7 negotiations. 8 I can tell you that the power plant has been 9 the largest single taxpayer in Niagara County for 10 many years. Its impact, you know, is felt 11 throughout the county. 12 And Chairman Ross has spent a great deal of 13 effort in the past three years articulating that 14 throughout the community. 15 It's not just a local issue in our area, it's 16 a countywide issue. 17 Certainly, you know, the local impacts on 18 Somerset and Barker School District taxpayers is 19 significant, but it goes broader than that. 20 SENATOR MAZIARZ: Thank you. 21 Senator Ritchie? 22 SENATOR RITCHIE: What's the population in 23 the annual budget of the town? 24 DANIEL M. ENGERT: Population in Somerset is 25 approximately 2,800, and the annual appropriations 1 budget is about 1.3. 2 SENATOR RITCHIE: And do most of the 3 employees at the facility, do they live in the town? 4 DANIEL M. ENGERT: I'm not aware of the 5 numbers. 6 There are significant number of employees 7 that work at the facility. Whether it's majority, 8 I'm not sure it's that high, but there is a 9 significant number of families who -- employees and 10 their families live in the town of Somerset, yes. 11 SENATOR RITCHIE: And what kind of hardship 12 would be on the town if the plant stopped running? 13 DANIEL M. ENGERT: I -- I -- I don't know if 14 I can quantify that. 15 We -- it would -- we rely on the facility for 16 about 60 percent of our tax payments. 17 And if I were to eliminate 60 percent of the 18 revenue from my Town tax -- from my Town budget, we 19 can't deliver services. 20 So I -- you know, to say what services are 21 going to start to be cut, I couldn't -- I mean, it 22 would touch every single service, every single 23 resident, in this community. 24 SENATOR RITCHIE: Thank you. 25 SENATOR MAZIARZ: Senator O'Mara? 1 SENATOR O'MARA: No. 2 Thank you. 3 SENATOR MAZIARZ: Assemblywoman Corwin? 4 ASSEMBLYWOMAN CORWIN: Nothing for me. 5 Thank you. 6 SENATOR MAZIARZ: Thank you very much, 7 Supervisor. We appreciate it. 8 DANIEL M. ENGERT: Thank you. 9 SENATOR MAZIARZ: Our next witness is 10 Gavin Donohue. Gavin, from the Independent Power 11 Producers of New York. 12 We're going to switch up here because of a 13 time constraint. 14 Don Jessome from the TDI Champlain-Hudson has 15 a time restraint, and we will -- Gavin has 16 graciously agreed to let you take his time. 17 DONALD JESSOME: Appreciate that, Gavin. 18 Thank you. 19 SENATOR MAZIARZ: Thank you very much, 20 Mr. Jessome, for being here today. 21 We appreciate -- we wanted very much -- the 22 Committee members and myself, want very much to hear 23 all sides of every issue when it comes to energy 24 policy, both short- and long-term. 25 And we appreciate you coming -- traveling 1 here to talk about the Champlain-Hudson Power 2 Express. 3 Thank you. 4 DONALD JESSOME: I appreciate being here. 5 I'd like to begin by thanking the New York 6 State Senate Energy and Telecommunications 7 Committee, its members, staff, for giving me the 8 opportunity to talk about the Champlain-Hudson Power 9 Express project, and the benefits it will bring to 10 New York State. 11 Transmission Developers, or, "TDI," the 12 company I lead as president and chief executive 13 officer, appreciates the importance of the work done 14 by the Committee, and we are willing and eager to 15 assist in providing the information it needs to 16 perform its functions. 17 In a few moments I'll go into greater detail 18 of many of the project's benefits, but before I do, 19 I'd like the Committee to know that a great deal of 20 information about the project can be found online at 21 the project's website, and also at the Department of 22 Energy's, which the federal Department of Energy's 23 Environmental Impact Statement website. 24 Both of these are part of our ongoing 25 communications with the community. 1 In addition, TDI has made a submission 2 regarding the project as part of the Governor's 3 Energy Highway Initiative. A link to this 4 submission is also available on the project's 5 website. 6 Furthermore, the record developed by the 7 Public Service Commission, or, the "PSC," with 8 respect to this project, which bears the PSC case 9 number, 10-T-0139, is extensive, and every document 10 filed over the last two-plus years in this case is 11 available online with the PSC as well. 12 The PSC process has been ongoing since 13 March of 2010. 14 Our first meetings with public officials 15 regarding the project began in the fall of 2008, and 16 we continue to meet with officials at federal, 17 state, and local levels on a regular basis. 18 We are committed to public outreach and 19 participation, and to that end, more than 20 public 20 hearings have been held in areas encompassing the 21 entire route of the project. 22 We anticipate there will more hearings 23 upcoming when the Department of Energy releases the 24 draft environmental impact statement, or, "EIS," 25 this fall, and we welcome them. 1 Our company is based in Albany and 2 New York City, and its majority shareholder is the 3 Blackstone Group, which is based in New York City as 4 well. 5 The project will bring 1,000 megawatts of 6 clean hydro and wind power to New York using two, 7 approximately 5-inch-diameter, high-voltage 8 direct-current cables which will be buried along 9 waterways and along railroad and highway 10 rights-of-way. 11 A converter station will be built on land 12 owned by the Consolidated Edison Company in Queens 13 to interconnect with the Con Ed's 14 alternating-current system. 15 The project is -- 16 The project will provide substantial benefits 17 to New Yorkers in a number of areas, and I will go 18 through those different areas. 19 Lower energy prices for New York ratepayers: 20 According to studies performed by 21 London Economics, it is estimated that the project 22 will reduce energy prices for New York consumers by 23 approximately $650 million per year. 24 These studies are fully available, both, on 25 our website, and have been filled with the 1 Public Service Commission as part of our Article 7 2 siting process. 3 A cleaner environment: 4 Bringing new clean hydro and wind power into 5 the New York market will provide environmental 6 benefits as well. 7 Current estimates show, that when the project 8 is fully in service, it will reduce emissions of 9 S02, NOx, CO2, and other pollutants. This means 10 cleaner air and water for New York families. 11 In addition, as part of the Joint Proposal of 12 Settlement, which is part of the Article 7 siting 13 process that we filed in February of this year, 14 there will be a $117 million Environmental Trust 15 Fund that will be established as part of the 16 project. It will foster an enhancing understanding 17 and protection of the state's aquatic natural 18 resources over the 30-plus years of the project. 19 Investment, economic development, and 20 new taxes for the state of New York: 21 The project will also benefit New York's 22 economy. In addition to bringing in 2.2 billion in 23 private-sector investment to the state, the project 24 will create an average of 300 constructions jobs per 25 year, for 3 1/2 years. 1 It is estimated by London Economics that the 2 economic activity that will be generated by the 3 construction phase will create an additional 4 1,200 indirect and induced jobs for New York State. 5 With nearly 50 percent of the total cost of 6 the project tied to installation during the 7 construction phase, the spending generated by the 8 CHPE project will increase New York's gross domestic 9 product by nearly $150 million per year. 10 Once in service, the lower energy prices that 11 will result from the CHPE project will create an 12 estimated 2,400 induced and indirect jobs across a 13 wide spectrum of the economy. 14 And, again, all of the studies that I'm 15 citing here tody have been filed, both, with the 16 PSC, and are fully available on our website. 17 New York State ratepayers will benefit as 18 well. Based on current estimates, the project will 19 provide approximately 20 million per year in local 20 property taxes to upland host communities. And 21 since the line will be buried, out of sight, and 22 virtually maintenance free, it will place, 23 virtually, no additional demands on the host 24 communities. 25 We will also be paying tens of millions of 1 dollars to the State of New York for use of the 2 waterways the project will traverse. 3 A stronger and more diverse energy grid: 4 Along with the very tangible financial and 5 environmental benefits that it will bring, the 6 project will also strengthen New York's transmission 7 grid, reduce transmission congestion, and diversify 8 the fuel-supply mix in the state -- 9 And I've hear on several occasions, or, 10 several of the speakers have brought this issue up, 11 and we fully agree, that diversity of fuel supply is 12 incredibly important. 13 -- and it will do this without using any 14 public or ratepayer money. 15 The project is, and will remain, a privately 16 funded merchant project, as recognized and required 17 by federal and state agencies. 18 This means New York can use its scarce 19 resources to invest in other needed upgrades to its 20 energy infrastructure, and not be investing in this 21 project. 22 The project represents 1,000 megawatts in an 23 approximately 40,000-megawatt system. 24 The state of New York has approximately 25 40,000 megawatts of generation. 1 This is 2 1/2 percent of the New York's 2 market needs. 3 As the economy grows and gets stronger, the 4 power needs of the New York market will grow, and 5 many great projects will be needed to address this 6 demand by the time this project goes on line in 7 2017. 8 Also, in the Governor's Energy Highway 9 Initiative, it was identified that there are many 10 projects today. The generation fleet is getting 11 much older. So, there will be a lot of new 12 generation requirements over the numbers of years in 13 front of us to meet all of the expected demand 14 increases in the state of New York. 15 There's broad and deep support: 16 Support for the project is broad and deep and 17 committed. 18 Every state agency, and there were seven in 19 total, participating in the Public Service 20 Commission's proceeding -- and this is through the 21 Article 7 process -- agreed that the project is in 22 the public interest and should go forward, as did 23 the Cities of New York and Yonkers, and the 24 Palisades Park Commission. 25 Twenty members of New York's congressional 1 delegation support the project. 2 Environmental organizations, such as 3 Scenic Hudson, the Riverkeeper, the League of 4 Conservation Voters, Trout Unlimited, and the 5 Coalition Helping Organize a Kleaner Environment 6 support the project. 7 Groups such as the Long Island Association 8 and the New York State Energy Consumers Council 9 support the project. 10 To date, three daily newspapers, the 11 "Watertown Daily Times," the "Times Herald Record" 12 in Middletown, and "Kingston Daily Freeman" have 13 editorialized in support of the project. 14 The Laborers' International Union of 15 North America and the New York State Conference of 16 Operating Engineers support the project. 17 All of these groups, and others, are backing 18 the project because it makes sense for consumers, 19 and it makes sense for New York State. 20 Before I close, I would like to mention that 21 trade with Canada is being recognized as an 22 important strategy to help grow New York's economy. 23 On September 17th of this year, 24 Governor Andrew Cuomo's North Country Regional 25 Economic Development Council issued a progress 1 report that stated, one of the Council's key 2 strategies is, and I quote, "Optimize fluidity at 3 the north country's U.S.-Canadian border crossings. 4 The relative ease and predictability of cross-border 5 movement of cars and commercial traffic, as well as 6 trains, boats, and energy transmission, is essential 7 to a successful north country economic future." 8 And we certainly agree with this assessment. 9 I thank you for the opportunity to talk about 10 our project, and I'm happy to respond to your 11 questions. 12 SENATOR MAZIARZ: Thank you. 13 Again, I want to thank you for being here, 14 and thank you for your testimony here today. 15 I have to respectfully say that I disagree 16 with much of what you've said. 17 And I just, for the record, want to point out 18 a couple of things, or maybe ask questions, and you 19 can point them out. 20 But, the economic study that you pointed out, 21 by London Economics -- 22 Now, I'm not familiar with London Economics. 23 I do not question their integrity or their ability, 24 or anything. 25 -- but, I think it would be important for the 1 record to point out, that your company actually 2 hired them and paid them for this study. 3 They did it on your behalf, is that not 4 correct? 5 DONALD JESSOME: They absolutely did. And it 6 was filed with the Public Service Commission, and 7 scrutinized, as part of the Article 7 siting, 8 because, as part of the Article 7 siting, economics 9 the one of the key drivers in that siting process. 10 SENATOR MAZIARZ: That you are absolutely 11 correct in that vein. 12 And I'd also like to ask, that -- I mean, 13 they did their study, but, in a filing with the 14 Public Service Commission, on this project, the 15 New York Power Authority indicated that the cost of 16 CHPE projects are significantly underestimated. The 17 costs are significantly underestimated, and that the 18 benefits of the project are significantly 19 overestimated. 20 Which is the opposite, I presume, of what 21 London Economics said. 22 And that's the New York Power Authority, 23 which operates, you know, within the state of 24 New York, as a public agency within the state of 25 New York. 1 But then, privately, an investor-owned 2 utility, Con Edison, said that, their estimate, in a 3 filing with the PSC also, I believe, said that their 4 estimate of the cost of CHPE would be more like 5 11 billion, which is five times what your 6 $2.2 billion estimate is. 7 DONALD JESSOME: Sure. So let me -- 8 SENATOR MAZIARZ: Can we reconcile all of 9 those differences? 10 DONALD JESSOME: Sure, let me sort of go to, 11 sort of each of those points. 12 First off, you know, the $2.2 billion 13 estimate for our project, is from the border to 14 Astoria, Queens. 15 So, anything within Canada, any generation 16 that's going to be built within Canada, which I 17 believe the Con Edison number incorporated, would 18 increase the cost of the -- you know, from generator 19 to end point. 20 So our project, when we talk the 21 "2.2 billion," is just within the state of New York. 22 The $11 billion, I can't speak to that 23 because it seems to me that there was no, you know, 24 detailed information provided by Con Ed. It was a 25 number that they put into one of their statements, 1 but there was no backup details. So, I certainly 2 can't comment on the $11 billion figure. 3 With respect to the 2.2 billion, I can speak 4 to that all day long. 5 The $2.2 billion figure has been a number 6 that we've been refining for approximately 7 four years. 8 And, we recently went out for an engineering 9 procurement and construction RFP, to attract some of 10 the best construction companies in the world, to 11 both supply equipment and to install the equipment. 12 And the -- we just received bids back, 13 actually, two weeks ago, and all of the bids have 14 completely validated our estimates and costs. They 15 were right on top of what our estimates are. 16 And we continue to carry a significant 17 contingency within our budgets, because we know that 18 there are lots of things that could be, you know, 19 found as we're going along this 330 miles. 20 So the -- one of the ways that we're trying 21 to reduce, and even make that cost lower than the 22 2.2 billion, is, as of today -- sorry -- a week ago, 23 we have boats out on the water once again -- we did 24 in 2010 -- that are doing very detailed route 25 surveys: bathymetry, side-scan sonar, magnetometers, 1 core samples. 2 And this is going everywhere, from Astoria, 3 Queens, all the way up to Russells Point, and all 4 points in between, in the Hudson River, the 5 Harlem River, the East River, and Lake Champlain. 6 We're going to be doing detailed studies 7 along, both the railroad rights-of-way and the 8 roadways that we're going to be traversing, we're 9 actually going to be taking core samples in hundreds 10 and hundreds of locations. 11 We're working with all of these parties, to 12 reduce the estimated costs of this project to 13 actually, hopefully, be below the 2.2 billion. 14 SENATOR MAZIARZ: Well, let's -- let's stay, 15 for a minute, on the 2.2 billion. 16 I mean, I understand you can say that the 17 2.2 billion will go from the New York border to 18 Astoria, Queens. New York-Canadian border to 19 Astoria, Queens. 20 But, the infrastructure, the production, the 21 generation, in -- somewhere in the province of 22 Québec. I mean, it could be -- it could be part of 23 the St. James Bay. 24 DONALD JESSOME: Well -- 25 SENATOR MAZIARZ: I mean, somebody -- 1 somebody's going to have to pay for that, from 2 New York to wherever the generating station is. 3 DONALD JESSOME: Okay -- 4 SENATOR MAZIARZ: And I can't -- I don't -- I 5 can't under -- I would find it incredulous that 6 ratepayers of Hydro-Québec in Canada would pay that 7 for a New York benefit. 8 DONALD JESSOME: So let me talk about the 9 Québec piece, and I'm certainly not going speak for 10 Hydro-Québec, but, here is my understanding of the 11 situation in Hydro-Québec, and actually, here's why 12 we started this project: 13 In 2005, the Department of Natural Resources 14 in Québec identified approximately 5,000 megawatts 15 of new hydro facilities that they directed 16 Hydro-Québec to start looking at, to develop. 17 Two of those projects are actually under 18 construction, and I believe one may have actually 19 just come into service. It's called "Eastmain," 20 which is approximately a 1,000-megawatt hydro 21 facility. 22 And the second project is called 23 "La Romaine," which is approximately 1,600 megawatts 24 that's coming on line, somewhere between 2016 and 25 2018, they're actually going to stage it. 1 So, they're actually building those 2 facilities, or have built those facilities, for the 3 export market, as we speak, so that those facilities 4 are, essentially, sunk costs. 5 On the Québec side of the border, they are 6 looking at building, it's approximately a 30-mile 7 transmission line, that would go from a substation 8 called "Hertel," which is part of the 9 Montreal 735 kV ring, to our transmission facility 10 at the border. So, they would actually just 11 interconnect with us. 12 The estimates of that are approximately 13 $400 million, and that's a combination of a 14 converter station, and the approximately 30 miles of 15 cable that they would run to interconnect with us. 16 SENATOR MAZIARZ: Okay. 17 The next point: I still think, you know, my 18 point, but somebody's got to pay for that. And I 19 think that they would expect the New York ratepayers 20 to do that. 21 But, you talked about the 1,000 megawatts 22 that this project is, as part of a 40,000-megawatt 23 state system that we have in New York. 24 And I think your point is, that this is just 25 a very small piece of a very large system. 1 But, wouldn't it be either TDI or -- and, 2 certainly, Hydro-Québec's, long-term goal to grow 3 that? 4 I mean, they grew it in Vermont, they grew it 5 in Maine, they grew it in other states in 6 New England. 7 Right now, in Vermont, I think they've grown 8 it to almost be -- Hydro-Québec, not necessarily 9 TDI, has grown their markets to almost one-third, or 10 I think maybe more than one-third, of the entire 11 Vermont energy market. 12 Now, I realize, you know, that comparing 13 Vermont and New York is maybe apples and oranges, 14 but I think that the methodology of, you know, 15 coming in low, and maybe even at a lower price, and 16 then growing that market, is clearly a strategy of 17 Hydro-Québec. 18 Don't you agree? 19 DONALD JESSOME: Well, I mean, Hydro-Québec 20 has been a supplier into the New York market for 21 over 80 years. So, it started, you know, long 22 before transmission developers had any, you know, 23 projects on the books. 24 SENATOR MAZIARZ: To a limited scale. 25 DONALD JESSOME: Approximately 1 2,000 megawatts today of hydro -- interconnection 2 between Québec and New York today, and that commerce 3 flows in both directions. 4 SENATOR MAZIARZ: Exactly. That's -- I don't 5 mean to interrupt you, but we should note that that 6 does flow in both directions. 7 DONALD JESSOME: And it does, absolutely, 8 flows in both directions, and it's a benefit to both 9 countries; and to the province of Québec and to the 10 state of New York. 11 SENATOR MAZIARZ: And Ontario. 12 DONALD JESSOME: And Ontario, and other 13 points in between. 14 You know, with respect to transmission 15 siting, I think we can all agree that transmission 16 siting is not easy. 17 So, saying that Québec has this grand scheme 18 of trying to, you know, push ten or twenty thousand 19 megawatts, or any number, a large number, into any 20 one particular market is, it's extremely difficult. 21 Transmission siting is extremely difficult, 22 it's hard to do, and it certainly doesn't happen 23 overnight. 24 So that's why these long-term energy 25 infrastructure projects have to go through very 1 careful review by, you know, the members of this 2 Committee, by the Public Service Commission, by the 3 Department of Energy, by the Army Corps of 4 Engineers. 5 This is going to be a highly reviewed 6 project, and it just doesn't happen overnight. 7 So, you know, 1,000 megawatts, again, in a 8 40,000-megawatt system is still a small number. 9 SENATOR MAZIARZ: Okay, I see that 10 Hydro-Québec has also submitted a proposal under the 11 Energy Highway R05. 12 Is that in conjunction with TDI, or is that 13 separate and apart from TDI? 14 DONALD JESSOME: I believe they have two. 15 I know the -- the one I'm familiar with is 16 the one that's associated with us. 17 And it's, essentially, they are looking to 18 utilize the transmission line to supply the New York 19 market. 20 SENATOR MAZIARZ: Last point: You stated 21 that the Champlain-Hudson line will not have -- will 22 not result in higher rates for consumers in 23 Upstate New York; and, yet, the economists -- the 24 top economists at the PSC testified that it will. 25 How do you -- 1 DONALD JESSOME: So let me just -- again, I 2 don't want to talk for the Public Service 3 Commission, but I will give you my perspective on 4 that. 5 The actual -- Dr. Painter [ph.], during his 6 cross-examination and testimony that we had in July 7 of this year before the administrative law judges, 8 was asked a very hypothetical question. 9 He did not do any research on it. 10 There was no direct testimony. There was no 11 information provided, other than, there was a 12 hypothetical question asked and answered. 13 The Public Service Commission, in its reply 14 briefs, then clarified that position, that, 15 essentially, they do not believe that it is going to 16 have an impact. 17 From our perspective, we have done the 18 analysis. The very detailed analysis. 19 And, you know, the analysis -- the latest 20 analysis that we've filed with the Public Service 21 Commission would actually say prices would slightly 22 go down in this area. 23 But it's -- you know, it's just like a pebble 24 in the pond. Because we're connecting way down in 25 Astoria, Queens, the largest impact are absolutely 1 going to be down in the New York City and, you know, 2 Westchester part of the state. 3 SENATOR MAZIARZ: Thank you. 4 I have many other questions and comments, but 5 we'll submit them to you, in the interest of time, 6 because I know you have to get going. 7 I'll ask Senator Ritchie to -- if she has any 8 questions? 9 SENATOR RITCHIE: In your testimony, you 10 talked about a number of jobs that this project 11 would actually create. 12 Could you be specific, what exactly you're 13 talking about there? 14 DONALD JESSOME: Sure. 15 So there's two phases of job creation. 16 There's the construction phase, which is the, 17 you know, sort of the obvious. 18 We've got converter stations to build. These 19 are large pieces of equipment. We have cable that 20 has to be buried. We have people that need be on 21 boats. There's approximately 140 miles of buried 22 cable along railroad rights-of-way. 23 So, significant amounts of work for 24 laborers' union, IBEW and other locals. This will 25 be a unionized job. We're working on project labor 1 agreements. 2 That's the -- sort of the direct jobs during 3 the construction phase. Approximately 3 1/3 to 4 4 years is the construction period. 5 During that construction phase, there's 6 induced and indirect jobs. It's, just, you put a 7 dollar in the economy and it grows beyond the 8 dollar. And, so, that's approximately 1,200 induced 9 and indirect jobs. 10 But probably the more important piece, is 11 once this project goes into service, it's going to 12 lower costs. And because it lowers costs, that 13 makes industry more effective. And when industry is 14 more effective, they can go out and use those scarce 15 resources on things other than paying their 16 electricity bills. They can use it to hire people. 17 And, the London Economics' analysis that has 18 been performed, along with Regional Economic 19 Modeling, Inc., which is a sister company that they 20 use to do these analysis, it's approximately 21 2,400 indirect jobs across the wide segment of the 22 economy. 23 All of the studies I'm talking about here 24 have been filed with the Public Service Commission, 25 and are fully available both on their website and on 1 our website. 2 SENATOR RITCHIE: So you're saying that the 3 majority of those jobs would be New York jobs? 4 DONALD JESSOME: Absolutely. Yes, 5 absolutely. 6 SENATOR RITCHIE: How many do you foresee 7 coming from Canada? 8 DONALD JESSOME: Canadian jobs in New York 9 State? Probably zero. 10 SENATOR RITCHIE: Zero? Okay. 11 The same as -- concerns that Senator Maziarz 12 had on the two topics, one of them for me had to 13 deal with the letter that NYPA submitted to the 14 Public Service Commission, and it actually talks 15 about the overestimates and the underestimates. 16 So I guess I would ask, with regards to the 17 cost-benefit analysis, your company filed paperwork 18 that utilized only one alternative. 19 Can you elaborate on why you only used one 20 alternative? 21 DONALD JESSOME: Sorry, one alternative 22 for...? 23 SENATOR RITCHIE: Well, as far as a 24 combined-cycle gas turbine facility, that's the only 25 alternative that was included in your presentation. 1 So -- 2 DONALD JESSOME: Oh, sure. 3 So, in the Article 7 siting, the parties who 4 are part of the joint-proposal settlement, and also 5 the parties who are opposed, get to file information 6 with respect to the project. 7 We filed, "we" being, TDI filed our 8 information with respect to the economics of the 9 project and the environmental benefits. 10 The Public Service Commission decided that 11 they would do an analysis, to compare a 12 combined-cycle -- best-in-class combined-cycle 13 gas-fired plant with our project. 14 So it was actually the Public Service's 15 analysis who did the comparison. 16 SENATOR RITCHIE: Okay. Thank you. 17 SENATOR MAZIARZ: Senator O'Mara? 18 SENATOR O'MARA: Just a couple of questions. 19 One is, to start out with, since we're on the 20 question of cost: If the cost estimates you have 21 are incorrect and it is higher costs to construct 22 it, what impact is that upon the ratepayers? 23 DONALD JESSOME: Zero to ratepayers. 24 So, let me just clarify that point, to be 25 very, very clear on this, because I think there has 1 been some misinformation. 2 We have made an extremely strong commitment 3 to the Federal Regulatory Commission, to the 4 Public Service Commission, with respect to, that 5 this is a merchant-transmission project. 6 "Merchant" means we have to go find our own 7 customers, we have to go find our own financing. 8 This is private-sector financing, and we have -- and 9 we are out, right now, looking for customers. 10 Hydro-Québec has put their hand up and said 11 that they would like, at least, for 75 percent of 12 the transmission space. So, they would actually be 13 paying for this project. 14 This project will not go forward if the 15 economics do not make sense for the people who are 16 going to be shipping on this line. 17 What we have made a commitment to, to the 18 Public Service Commission, is, we will not even go 19 forward with this project unless we have a 25-year 20 contract with a credit-worthy counterparty for at 21 least 75 percent of the capacity on this line, to 22 further protect any ambiguity as to whether or not 23 this is a merchant-transmission line or not. 24 So any risks associated with the project 25 costs going up are fully beared by TDI, Blackstone, 1 and the shippers. 2 SENATOR O'MARA: Won't the cost of that, 3 though, to Hydro-Québec go up, depending on what the 4 cost of your construction is, and building that into 5 their rate for what they charge for the electricity 6 being delivered? 7 DONALD JESSOME: Well, the way the markets 8 work in New York State, is they bid their price into 9 the marketplace, and, if it clears, it clears, and 10 if it doesn't, it doesn't. 11 Because they're -- once it's in service, this 12 is a sunk cost to them. So what they would be doing 13 is, they would be bidding their power prices into 14 the market at their marginal cost of production, 15 which is, you know, in a hydro facility is 16 essentially zero. 17 So, for them, that this cost risk is similar 18 to any other cost risks that they have on major 19 infrastructure. 20 But once it's in service? Once it's in 21 service, their marginal cost of production is 22 essentially zero, and that's what they bid into the 23 market. 24 And that's actually highly regulated by the 25 New York Independent System Operator, as to bidding 1 prices that come into the marketplace for different 2 generation facilities. 3 SENATOR O'MARA: This line will terminate in 4 Astoria, Queens. 5 What other connections along the line will 6 there be throughout New York State? 7 DONALD JESSOME: There will be none. 8 This will be into Astoria, Queens. 9 However, there already is an interconnection 10 to this line through the Québec system. 11 So, we had talked earlier about a bilateral 12 trade that goes back and forth across the 13 Québec-New York interface on a daily basis, every 14 hour of the day. 15 Generators in Upstate New York, and other 16 places, actually can gain access to our transmission 17 facility through the existing AC transmission 18 system. 19 SENATOR O'MARA: And then have to transmit 20 it, up through Canada, back down around through the 21 Champlain-Hudson line? 22 DONALD JESSOME: Correct. 23 SENATOR O'MARA: And there's no inputs for -- 24 other than that route along the Hudson River, for 25 our New York State power plants to supply power into 1 that line? 2 DONALD JESSOME: At this point in time, that 3 is correct. 4 SENATOR O'MARA: Are there any projections or 5 plans to possibly do that? 6 DONALD JESSOME: There certainly can be in 7 the future. 8 Converter stations along the way can be 9 built. That is a potential for a future. 10 SENATOR O'MARA: And I heard concerns about 11 the cost of a converter station to be -- put it on 12 the line. 13 Could you elaborate on what the cost for a 14 converter station would be? 15 DONALD JESSOME: Sure. 16 A 1,000-megawatt converter station is 17 approximately $200 million. 18 And, so, it's not one-for-one, so, you know, 19 a 500 megawatt is not 100. It's probably 120. 20 There are some economies of scale as you get 21 into larger converter stations, but that's kind of a 22 good rule of thumb. 23 SENATOR O'MARA: Thank you. 24 SENATOR MAZIARZ: Thank you, Senator. 25 Assemblywoman Corwin? 1 ASSEMBLYWOMAN CORWIN: Thank you very much. 2 Just a couple of quick questions regarding 3 energy security. We're talking about running power 4 from one country into another. 5 Obviously, Canada has been a very good friend 6 to us. We've had a great relationship for many 7 years, however, there's no guarantee that 50 years 8 down the line, or 75 years down the line, that we 9 have a different relationship with them. 10 This compact that you're negotiating with 11 Hydro-Québec, what kind of guarantees are there, 12 that you're negotiating, that would ensure that we 13 don't have any problems, going forward, as far as, 14 the relationship, cross-border issues, terrorism 15 issues, whatever? 16 Are you putting guarantees in this contract, 17 to make sure that nothing would get in the way of 18 that power getting down to New York City? 19 DONALD JESSOME: Well, what we are 20 negotiating with Hydro-Québec is a 21 transmission-service agreement. So, they would pay 22 us the right to use the transmission facilities to 23 deliver power. 24 I would say, to answer your question 25 directly, we are not negotiating an agreement that 1 essentially says, you know, the two countries are 2 going to be best friends forever. 3 What we're agreeing -- you know, what we're 4 negotiating is a very economic contract that Québec 5 is highly incented to deliver the energy. 6 And all of our studies say that it's highly 7 utilized at, you know, 95 percent of time, just 8 because the economics are so strong for the parties. 9 So, you know, from a security perspective, I 10 think that we just have to look at the 80 years of 11 very secure supply from Québec, into New York, and, 12 you know, project that out, forward, because there 13 is such strong economic basis for the relationship. 14 ASSEMBLYWOMAN CORWIN: And just -- I -- and 15 forgive me for not knowing this: Hydro-Québec, do 16 they provide power to Ontario and Toronto, the 17 southern Ontario region? 18 DONALD JESSOME: They certainly supply into 19 Ontario. They supply into Atlantic Canada. They 20 supply into New England. And I believe they may 21 supply into the PJM market as well. 22 ASSEMBLYWOMAN CORWIN: Okay, because Toronto 23 and southern Ontario is a very, very fast-growing 24 region of Canada. Obviously, Canada would benefit 25 from running more power into their fast-growing 1 region as opposed to another country's region. 2 Are there any kind of guarantees that power 3 wouldn't get redirected, or become prohibitively 4 expensive going to New York City, because power 5 would be going back to their faster-growing city, 6 Toronto? 7 DONALD JESSOME: Well, southern Ontario, 8 there's no question that it's growing at a very, you 9 know, good clip. 10 But there -- you know, the -- I think the -- 11 what I -- keeps me, you know, going on forward on 12 this project, is New York City is still the most 13 expensive market in America. 14 And that's why this project is economic, is 15 because the fact that it is an expensive market; and 16 therefore, it needs new supply. 17 And, you know -- you know, there are, 18 certainly, other markets that they can look at, but 19 they're restricted just like every other market on 20 the transmission intertie capability. It's very 21 difficult to build transmission. 22 You know, crossing a border is extremely 23 tough. And, so, it's -- you know, it's just very 24 difficult to get, you know, all of that transmission 25 built so that, you know, all of the supply would go 1 to just one marketplace. 2 ASSEMBLYWOMAN CORWIN: Okay. 3 Also, you were talking about the lower energy 4 costs to businesses in New York State. 5 I'm assuming you mean it would lower the 6 overall energy cost because it could go into the 7 independent system and, generally, reduce costs. 8 A business in Western New York, how would 9 their costs -- energy costs go down because of this 10 system? 11 DONALD JESSOME: It's approximately 12 3 percent. 3, to 2, percent, depending upon whether 13 you're commercial, industrial, or residential. And, 14 it's not a larger number. It's just because of the 15 fixed costs of infrastructure is a large percentage 16 of the bills in that market. 17 ASSEMBLYWOMAN CORWIN: But, assuming that the 18 New York City-area businesses would see a bigger 19 decrease in costs, than -- 20 DONALD JESSOME: No, no -- 21 ASSEMBLYWOMAN CORWIN: -- that's something 22 that's outside of that service area? 23 DONALD JESSOME: That's correct, yes. 24 And we actually have posted those all on our 25 website, and we've broken it down into 1 New York City, Long Island, Westchester, and -- 2 just, those were the easiest ones for us to be able 3 to calculate, because as you get north, it just 4 becomes smaller and smaller, and so it's less 5 significant. 6 ASSEMBLYWOMAN CORWIN: And, also, just one 7 last question: You talked about the economic 8 advantage for doing this project right now. 9 Are you including any kind of price floors or 10 ceilings, or anything like that, in your 11 negotiations for the Hydro-Québec, so that if the 12 economic situation were to change, and -- to prevent 13 it from becoming economically infeasible? 14 I mean, are you -- it's attractive right now. 15 30 years, 50 years down the line, New York City 16 could be a very different place, prices can be very 17 different. 18 Are you putting any kind of guarantees in 19 there to make sure that we don't get future 20 increases in costs down the line? 21 DONALD JESSOME: We're actually -- the 22 guarantee to us, is that they will buy the space on 23 the line. 24 And, so, they're guaranteeing to us that they 25 will buy the space, and they will utilize -- you 1 know, and then they will use it, to utilize, to take 2 their supply to marketplace. 3 So, we have very strong guarantees to ensure 4 that they are going to pay us for that service. 5 ASSEMBLYWOMAN CORWIN: Okay. 6 All right, thank you very much. 7 DONALD JESSOME: Thank you. 8 SENATOR MAZIARZ: Thank you. 9 Just one more question, and then an 10 observation I'd like to make. 11 You stated that the TDI project would result 12 in reductions in certain types of emissions, thereby 13 helping the environment. 14 Can you tell me where those emission 15 reductions are going to come from? 16 DONALD JESSOME: We have the reports. I can 17 certainly supply those to you. 18 I just -- it's in the state of New York, 19 only, that I'm talking about. That -- there 20 actually is environmental benefits beyond the state 21 of New York, but, when I talk numbers here today in 22 front of this Committee, it's strictly state of 23 New York. 24 We can supply those to you. 25 SENATOR MAZIARZ: Okay. 1 And just an observation I want to make. 2 You did mention some labor unions that were 3 in support of this project. 4 I should just say, and later on, because I 5 know you'll be leaving, that some labor unions will 6 be testifying here in opposition to this project 7 too. 8 So I think it's just fair to, you know, state 9 that there was labor unions that are in opposition 10 to this project too. 11 I do, Mr. Jessome, want to thank you. 12 I can tell you that, on behalf of the 13 Senators and the Assemblywoman, in our lives, 14 sometimes it is very difficult to go to public 15 meetings or public hearings where you know many of 16 the people disagree with you. Those are never easy 17 to attend. 18 And we appreciate the fact that you took the 19 time to travel here, to come up here. 20 DONALD JESSOME: No, I appreciate being here, 21 and, you know, any time. 22 SENATOR MAZIARZ: Thank you. 23 DONALD JESSOME: We're happy to -- 24 SENATOR MAZIARZ: All right. Thank you very 25 much. 1 And thank you to Gavin Donohue for letting us 2 switch-up here. 3 DONALD JESSOME: Thanks, Gavin. 4 SENATOR MAZIARZ: Next is Gavin Donohue. 5 Gavin is the head of the Independent Power 6 Producers of New York. 7 GAVIN J. DONOHUE: Thank you, Senator. 8 Senators, Assemblywoman, thank you for having 9 me here today. 10 I'm here to discuss the issues regarding 11 economic development and infrastructure investment 12 in the energy industry in New York State. 13 As president of the Independent Power 14 Producers, also known as "IPPNY," we represent 15 generators, power marketers, and other participants 16 in New York's competitive energy markets. 17 IPPNY member companies utilize cutting-edge 18 technologies and fuel types, such as cogeneration, 19 nuclear, hydro, coal, wind, oil, landfill gas, 20 natural gas, and energy-from-waste, and biomass. 21 This diversity of fuels protects consumers 22 from dramatic price variations resulting from an 23 overdependence on one fuel type and increased 24 electric-system reliability. 25 A reliable and robust energy industry is 1 important for both state and local economies. 2 IPPNY's members drive the state's economic 3 engine, and continue to build, improve, and invest 4 in New York's energy-supply infrastructure. 5 As providers of approximately 75 percent of 6 the state's electricity, Independent Power Producers 7 have invested in excess of $10 billion to purchase, 8 construct, and operate their facilities. 9 Generators also pay over 600 million, and 10 invest $50 million in their communities, as good 11 corporate partners. 12 In addition, these facilities provide 13 well-paying jobs to more than 10,000 individuals 14 across New York State. Many of these facilities are 15 located in Western and Upstate New York, where they 16 are either the largest or amongst the biggest 17 employers and taxpayers in their local community. 18 Since these facilities are outstanding 19 corporate citizens, there are significant impacts to 20 a community if a power plant makes the tough 21 decision to close because it is no longer 22 financially viable. 23 While the competitive electricity markets in 24 the state have led to savings for energy consumers, 25 enhanced economic development, reduced emissions, 1 and a more reliable system, they also, naturally, 2 have led to increased competition. 3 In a difficult business and economic climate, 4 increased competition is good for consumers, but not 5 necessarily for each market participant. 6 On the plus side, since 2000, competitive 7 markets have spurred the siting of more than 8 9,000 megawatts of new generation, with over 9 80 percent of that supply located in New York City, 10 on Long Island, and in the Hudson Valley, regions 11 where power demand is greatest. 12 A diversified generation fleet has been 13 developed, including over 6,000 megawatts of 14 renewable resource capacity in the state. 15 On the other hand, lower natural gas prices 16 and increased coal prices have left many facilities 17 finding it interestingly [sic] difficult to compete. 18 Conducting business in New York has long been 19 considered tremendously unattractive due to high 20 property taxes and regulatory uncertainty. 21 While competition drives the energy industry, 22 these tough economic times make it more and more 23 difficult for these companies to continue to survive 24 in New York, and across the country. 25 From Western New York to Long Island, 1 New York State generation resources face challenges 2 like most businesses in today's economy. 3 In addition to a difficult business climate, 4 environmental regulations and policies place 5 additional constraints on these units. 6 Although emissions have already been reduced 7 significantly since 2000, in New York State, the 8 rate of power-plant emissions of sulfur dioxide have 9 dropped more than 86 percent, nitrogen oxide has 10 declined by over 76 percent, and CO2 has been 11 reduced by 36 percent. 12 These emission reductions have been 13 accomplished through corporate investments without 14 ratepayer impact, given that competitive energy 15 markets have resulted in the shift of the risk of 16 investment and operational decisions off of energy 17 consumers and onto company shareholders. 18 The cumulative effect of the layering of 19 environmental requirements impacts cost, fuel 20 diversity, and energy-system reliability. 21 More than half of the installed generation 22 capacity in New York State is estimated to be 23 impacted by recently adopted or proposed state and 24 federal and regional regulations, and these units 25 face the decision to retrofit or retire. 1 Several power facilities have retired 2 already, others are contemplating doing so, thereby 3 putting at substantial risk of hundreds of 4 well-paying essential jobs for New York's workforce, 5 and the contribution of millions of dollars of 6 property taxes and other payments made by New York 7 generators. 8 Competition clearly has its place in 9 New York, as it has accomplished so much. And one 10 of IPPNY's major goals is to continue to support the 11 competitive running of the competitive marketplace. 12 By design, the markets are intended to 13 promote investment in the most efficient and 14 economic resources, because competition determines 15 what resources should remain in service. 16 Unfortunately, some less-efficient power 17 plants may retire in order to ensure the market 18 supports the better-performing ones. 19 That is not to say that we are insensitive to 20 the local impacts of these potential facility 21 closures, but the solution may be to help localities 22 directly instead of taking steps that interfere with 23 the markets. 24 If a struggling plant is needed for 25 reliability, the New York Independent System 1 Operator has procedures in place to ensure the 2 system reliability is maintained. 3 Along that vein, due to the negative effects 4 in the market, we should not support the entry of 5 projects that are uneconomic. 6 One such project, and we heard about today, 7 has been the focus of a lot public attention, is the 8 Champlain-Hudson Power Express transmission line 9 proposed by TDI. 10 I'm trying to run through this a little bit, 11 not to be redundant. 12 The transmission line, as you know, will run 13 from the U.S.-Canadian border into New York State, 14 under Lake Champlain and the Hudson River, and will 15 import over 1,000 megawatts into the city. 16 And as we -- we strongly believe it makes no 17 sense, from an economic, public policy, or energy 18 perspective. 19 The line is a 333-mile "extension cord" 20 running from Québec into New York City, while 21 bypassing New York generators that have already made 22 major investments in the state. 23 The Champlain-Hudson Power Express line would 24 undercut critical investments in both in-state 25 generation and transmission, and potentially close 1 power-generating facilities. 2 A major focus for New York State is improving 3 the state's economy, and stabilizing, as well as 4 increasing, the number and quality of jobs for its 5 citizens. 6 However, the job-creation benefits touted by 7 TDI substantially are overstated, and fail to 8 account for the offsetting job losses at existing 9 power plants which may be forced out of the market 10 as a result of the operation of the TDI line. 11 Senator Maziarz, as you stated earlier today, 12 one of the most compelling reasons to oppose the TDI 13 line, is that the economics of the line simply do 14 not work, and the economic analysis that has been 15 conducted on the project is based upon data and 16 assumptions that contain major flaws. 17 The line's costs greatly exceed any of its 18 benefits, and the revenues needed to support the 19 costs of the line currently are not available 20 through New York's energy markets. 21 As such, the line is not viable financially 22 without subsidized Canadian power and/or an 23 above-market contract with New York ratepayer-backed 24 entity. 25 These subsidies will definitely lead to 1 significant higher costs for the state's energy 2 consumers. 3 The uneconomic nature of this project is 4 illustrated in an informational piece IPPNY created, 5 entitled "A Bad Deal for New York State," which is 6 included with our testimony. 7 The map shows, that although a Canadian 8 generator is chasing a higher price by selling 9 electricity into the New York City market, the cost 10 to deliver that power is more than the price 11 difference they would receive. 12 That would be like a restaurant delivering a 13 pizza to a far-away location for a higher price, but 14 spending more in gas to deliver the pizza than the 15 price they would get paid for it. 16 In the case of the Champlain-Hudson line, it 17 simply does not make economic sense to use the line 18 when the benefit of accessing the higher-priced 19 market is lower than the cost to use the line. 20 The proposed project also would not include 21 the transmission of renewable energy resources from 22 Upstate New York to other parts of the state. 23 Threatening the development of such renewable 24 resources impedes the State in meeting its RPS goal 25 of having 30 percent of the electricity consumed by 1 New Yorkers come from renewable resources by 2015. 2 Large-scale water impoundments in Canada, the 3 most likely source of the power to be transmitted 4 over the line, do not qualify for the New York RPS 5 program. 6 TDI claims that the New York generators could 7 access the proposed transmission line by simply 8 "wheeling" or transmitting power up to Canada first, 9 then down to New York City, but this approach is 10 also uneconomic and not financially feasible. 11 Like the "Bad Deal" piece previously 12 discussed, despite the attraction of higher 13 New York City energy prices, the cost to deliver the 14 power there from Upstate New York via Canada is just 15 too great and more than the price difference to be 16 received. 17 Additionally, the proposed Champlain-Hudson 18 project will not alleviate existing congestion in 19 the state's power grid or address the most pressing 20 in-state transmission issues. It only will 21 circumvent them by bringing in power from another 22 country. 23 The TDI project is strongly at odds with the 24 Governor's stated goals of his Energy Highway 25 Initiative, to build public-private partnerships and 1 invest in New York resources, workers, and 2 communities. 3 The Energy Highway Initiative is seeking 4 investment in New York State resources to upgrade 5 the state's energy infrastructure in both 6 transmission and generation. However, the TDI line 7 does not provide any benefit, and, in fact, serves a 8 threat to competitive energy markets, existing 9 resources in New York State, and the associated jobs 10 and numerous benefits provided by in-state power 11 generators. 12 Although the proposed project will pass 13 through many of the state's communities, it will 14 provide no benefit to those localities in the form 15 of jobs or tax revenues. 16 This ramped-up importation of power from 17 Canada is not needed. Private investment through 18 the state's competitive marketplace has ensured that 19 more than sufficient quantities of power supplies 20 exist to meet the state's energy needs now and for 21 the foreseeable future. 22 Moving forward to address the needs of the 23 state, including Western New York, Senator Maziarz 24 championed the development of the law for the 25 Recharge New York Power Program and the re-enactment 1 of the Article 10 siting law, breaking numerous 2 years of gridlock on both issues. 3 Additionally, during the State budget, 4 Senator Maziarz and his colleagues continuously 5 guarded against taxes and fees on the energy 6 industry and, importantly, their impact on energy 7 consumers. 8 Building on those successes, Senator Maziarz 9 has introduced two bills that are vital to help 10 address the state's economy and future energy needs. 11 We need to capitalize on opportunities to 12 revitalize New York State's economy from inside out. 13 And I would like to thank Senator Maziarz for 14 once again demonstrating his commitment to the best 15 interests of New Yorkers through this legislation. 16 First, Senate Bill 7391 would limit the use 17 of eminent domain only to activities that achieve a 18 public use, benefit, or purposes that maximize 19 benefits to New York. 20 This legislation prevents outside entities 21 from using eminent domain to access our waterways, 22 land rights-of-way and, ultimately, New York 23 ratepayers. 24 This legislation is consistent with existing 25 New York State law that already contains provisions 1 that limit the ability of certain companies to use 2 eminent domain, and as such, does not set a new 3 precedent. 4 Additionally, the legislation does not limit 5 other future projects from occurring, including the 6 kind of projects the State should be encouraging for 7 economic development and electric-system-reliability 8 reasons. 9 Senator Maziarz's legislation would ensure 10 that the power of eminent domain is available for 11 the construction and development of transmission and 12 generation facilities and infrastructure in 13 New York State, rather than outside the country, as 14 in-state facilities maximize energy-system 15 reliability, employment, and economic development. 16 As a result of the Senator's legislation, the 17 types of projects that would not be allowed to use 18 eminent-domain powers are those that fail to provide 19 the job, tax, and community-stability benefits that 20 in-state resources do. 21 Another important proposal that 22 Senator Maziarz is advancing is Senate Bill 7789, 23 which would help address the local impact of 24 potential power-plant closures. 25 This bill would direct the New York Power 1 Authority to issue a Request for Proposals for the 2 sale of its 10 gas-turbine generating facilities 3 smaller than 80 megawatts in size and located in and 4 around New York City. 5 NYPA would report the range of bids to the 6 Governor, the Temporary President of the Senate, and 7 the Speaker of the Assembly, subject to 8 confidentiality requirements. NYPA then would 9 commence actions, as its board of trustees 10 determines appropriate and necessary, to effectuate 11 the sale of those facilities. 12 This privatization of assets is not a new 13 idea, as previously, in 2000, NYPA sold its nuclear 14 facilities to a private-sector owner for 15 $967 million. 16 Potential revenue from New York State from 17 the sale of these turbines could range from 18 $400 million to $750 billion [sic]. 19 This legislation would use the revenues from 20 the sale of NYPA facilities to provide assistance to 21 municipalities that have been impacted by the loss 22 of property-tax revenues due to the closing of major 23 electric-generating facilities, such as those here 24 in Western New York. 25 In addition, this legislation would 1 facilitate the repowering and replacement of 2 existing energy systems to reduce overall emissions 3 and environmental impacts. 4 In addition, the sale of NYPA's facilities 5 would put tax-exempt property back on the tax rolls 6 and generate more property-tax revenue for 7 New York City. 8 By the State putting these generating 9 facilities up for sale, new businesses and revenues 10 will be attracted to the state. 11 The Senator's legislation, therefore, is a 12 win-win for both upstate and downstate. 13 The sale of NYPA's turbines makes sense, as 14 private companies continue to operate generating 15 facilities reliably, efficiently, and economically 16 more than ever. 17 In addition, this action would shift any 18 future risks and costs associated with these 19 facilities from the public to the private sector. 20 These facilities are extremely low-emitting, from an 21 environmental standpoint, and their ownership by 22 private entities further will ensure increased 23 efficiencies and economic operations. 24 Also, a policy discussion to sell the 25 turbines is consistent with the recently adopted 1 New York State energy plan. 2 Thank you for the opportunity to provide some 3 formal comments today, and I'm happy to answer any 4 questions, Senator. 5 SENATOR MAZIARZ: Thank you very much, Gavin. 6 And thank you for the work that you do 7 year-round in Albany on behalf of the state's 8 energy. 9 I'm going to ask Senator Ritchie to start off 10 with the questioning. 11 SENATOR RITCHIE: Gavin, you actually stated 12 that the job benefits by the company are overstated. 13 Can you elaborate a little bit on that? 14 And, also, what you see as potential job 15 losses if this line goes through? 16 GAVIN J. DONOHUE: From a job-losses 17 standpoint, I'll start there, I think everybody in 18 this room knows, and certainly you as elected 19 representatives, that we have so many facilities 20 across the state that are struggling just to stay in 21 the business. 22 And this line, by coming into New York, into 23 New York City, will exacerbate what I think is a bad 24 situation and put those jobs at risk. 25 I can't tell you today, if this line is 1 constructed, how many jobs will be lost, and how 2 many New Yorkers will be out of work, and what that 3 will do to the local community, but, clearly, it 4 will make a bad situation worse. 5 To answer your first question second, the 6 line, for those that may not know, is completely 7 under water, down the length of Champlain and the 8 Hudson River. 9 And as Don indicated, you know, there is no 10 way at this point for folks to access that line 11 because of just how it's physically constructed. 12 So, when you talk about overstating the jobs, 13 I think the labor unions later, that are going to 14 testify, may have more specifics on job impacts, but 15 it's, clearly, the line will not be accessible to 16 New Yorkers. So, I'm not really sure how many 17 New Yorkers are going to get jobs as a result of the 18 line. 19 SENATOR RITCHIE: And just one more follow-up 20 question: 21 In your opinion, what is the number one thing 22 that New York State can do to facilitate the 23 transfer of electric generation from upstate, in the 24 area that I represent, to New York City? 25 What would be the "number one" thing and the 1 first thing we should do? 2 GAVIN J. DONOHUE: Well, when the 3 "energy highway" was announced, Governor Cuomo made 4 a strong statement about the age of the 5 infrastructure in the state. 6 Transmission lines are 80 years old. We have 7 generating units that are very old. 8 We need to figure out a way to make the 9 infrastructure in this state better. We need to put 10 money into the infrastructure. So, we need to do 11 work on the transmission side, along with the 12 generation side. 13 Right now, the Energy Highway Initiative is 14 looking at a lot of different things that have been 15 proposed. But, certainly, we have upstate resources 16 that are unable to get their product to market. And 17 whatever needs to be done to improve that, so they 18 can be competitive, needs to be done. 19 I'm not here today to endorse one specific 20 transmission proposal over another in the state 21 because, quite frankly, that has impact on 22 ratepayers within the state, and that analysis 23 hasn't been conducted yet. 24 But, certainly, improving the transmission 25 system, and the general investments in New York's 1 infrastructure, would be most important. 2 SENATOR RITCHIE: So in your opinion, there 3 are a number of upstate facilities that could 4 generate additional capacity to send to 5 New York City, if, in fact, the transmission line 6 was upgraded? 7 GAVIN J. DONOHUE: Correct. 8 SENATOR RITCHIE: Thank you. 9 GAVIN J. DONOHUE: Thanks, Senator. 10 SENATOR MAZIARZ: Senator O'Mara? 11 SENATOR O'MARA: What models or mechanisms do 12 you see to upgrading our transmission facilities in 13 New York, as you talked about, that would have the 14 least impact to ratepayers? 15 In other words, how they would be financed 16 and paid for without doing it on the backs of the 17 ratepayers? 18 GAVIN J. DONOHUE: Well, I -- you know, 19 again, I think that analysis is ongoing with the 20 Governor's "energy highway," as we sit here today. 21 I was surprised at the level of projects that 22 were submitted. 23 I think what should happen, is that the 24 market should be allowed to work. That, if the 25 State decides something needs to be built, the best 1 way to build it would be to have a 2 non-discriminatory RFP, and that everything can 3 compete at the fair level, so that we don't say: 4 Well, we like, you know, biomass over gas, so only 5 biomass proposals would qualify. 6 Just using that as an example. 7 So the best thing do, would be to allow the 8 market to continue to work, but, if the State feels 9 there's a public-policy goal that needs to be met, 10 just to make sure that it's compelling, make sure 11 that it's non-discriminatory and that everybody can 12 compete on the same level, would be the least way to 13 impact ratepayers. 14 SENATOR O'MARA: How do you, on behalf of the 15 Independent Power Producers, assess our current 16 condition of fuel diversity in New York State? 17 GAVIN J. DONOHUE: That's one of the best 18 things we have going for us. We're very diverse, 19 from a fuel standpoint, and we have to continue that 20 fuel diversity. 21 I think Jerry indicated that this morning. 22 And we can't jeopardize our fuel diversity, 23 and it's important, because states that have 24 over-relied on one fuel or another, when the market 25 changes and gas prices go back up again, and they 1 were over-reliance on natural gas, then, all of a 2 sudden, the ratepayers are going to be hit harder. 3 So, we need nuclear, we need coal, we need 4 gas, we need hydro...we need it all. And, we need a 5 balanced portfolio. 6 And we have that, we just need to continue to 7 build on it. 8 SENATOR O'MARA: One last question, Gavin. 9 In your comments you mentioned that this TDI 10 project is not financially viable without subsidized 11 Canadian power. 12 Can you just explain to me the Canadian-power 13 subsidization process, and what we're up against as 14 far as fair competition between those generators and 15 our generators here in New York? 16 GAVIN J. DONOHUE: Well, you know, 17 fundamentally, we've been very involved in this 18 process for two years. 19 We've been on the other side of TDI. We've 20 supplied our own experts and our own testimony. 21 We've spent a lot of money on this. 22 So, I mean, I have a different take than Don 23 does on the project, obviously, but, HQ is a 24 government-owned utility that is going to compete 25 against New York generators. So, it's as simple as 1 that. 2 I think it's fair to say, that the thing that 3 you, as Senators and policymakers can do, and I 4 would encourage you to do this, is, you know, Don 5 was very clear, saying that TDI is a merchant 6 project. 7 And I think this process has made it more 8 transparent and better, to ensure that this could be 9 a merchant project if it's approved. 10 What I think the Legislature could do, and 11 folks that are concerned about this, is make sure 12 that HQ, as the shipper on the line, is held to that 13 highest standard, so that, somehow, the certificate 14 isn't transferred to HQ, and then HQ gets into an 15 out-of-market contract with NYPA, or some other 16 entity, and somehow a payment go backs to TDI as a 17 way to fund the project. 18 I get what Don has said and what TDI has 19 said. They want to be merchant, and I appreciate 20 that. 21 But nobody here has looked to: What are we 22 going to do to ensure that HQ doesn't come to get 23 subsidized as a result of this project? 24 So, I mean, we can talk about legislation and 25 we can talk environmental regulations. 1 As elected representatives, I think that's 2 one thing that you could do, to assure that the PSC 3 holds HQ to the same standards that they're going to 4 hold TDI. 5 SENATOR O'MARA: Thank you. 6 SENATOR MAZIARZ: Assemblywoman Corwin? 7 ASSEMBLYWOMAN CORWIN: Thank you. 8 Thank you, Gavin. 9 Just to make sure I'm understanding here, 10 previous comments have made the point that this 11 project, the Champlain-Hudson project, would just be 12 another diverse energy source. You know, 13 1,000 megawatts as part of the 40,000 in the state, 14 kind of like, well, here's another competitor in the 15 marketplace. 16 And perhaps that's true in the short term. 17 Would you characterize this whole situation 18 as accurate in the long-term? 19 I mean, what I'm hearing from you, is that 20 they're going to come into the marketplace, they'll 21 come in significantly lower and, basically, wipe out 22 all the plants that are already existing, who are 23 having to work under tougher regulations and higher 24 costs. 25 GAVIN J. DONOHUE: Yep. 1 ASSEMBLYWOMAN CORWIN: So that, in the long 2 term, would you say that allowing this line to come 3 down the Hudson would diminish competition in the 4 marketplace? 5 GAVIN J. DONOHUE: Yeah, I would like to get 6 to a point I think that Senator Maziarz said at the 7 beginning of this hearing. 8 Currently, there's a project going on between 9 New Jersey and New York City, to go 8 miles, and 10 it's cost 800 to 900 million dollars to build. 11 I know we talked earlier about the finances. 12 The PSC economist in that proceeding has said 13 that it will take 40 years for them to see any 14 economic benefit by the New York Power Authority in 15 the result of that line. 16 So you're trying to compete in New York, and 17 we're looking at projects where people are saying: 18 Well, it will take 40 years for them to see an 19 economic benefit as a result of the construction of 20 this project. 21 And that's what I'm hearing here today, is 22 that, you know, in the long term, how do you compete 23 and make financial decisions when your company is 24 strapped, when you have a project out there that 25 says, Well, you know, there will be an economic 1 return in 40 or 50 years? 2 And that's on the record, and I encourage the 3 Legislature to go look at what the PSC economist 4 said about HTP in New York City, because the costs 5 are astronomical, and today, there's no customers 6 for that. 7 So the New York Power Authority is assuming 8 all of the costs of that project, which is directly 9 impacting your ability, as Senators and 10 Assemblywoman, to bring benefits to your local 11 communities. 12 ASSEMBLYWOMAN CORWIN: So would you say, if 13 we were to allow this project to go through, that in 14 the long term, there would be more or less 15 competition in the marketplace? 16 To me, competition is what drives prices 17 down. 18 GAVIN J. DONOHUE: Yeah. 19 ASSEMBLYWOMAN CORWIN: My concern is, that if 20 we allow this in, and our other power plants get 21 wiped out, well, there is no more competition. 22 GAVIN J. DONOHUE: I would agree with your 23 theory. I mean, that would make it less competitive 24 in New York. 25 ASSEMBLYWOMAN CORWIN: Okay, so then we're at 1 risk, you know, 20 years, 30 years down the line, 2 of, potentially, you've got fewer -- 3 GAVIN J. DONOHUE: And how do you make 4 financial judgments, if somebody says: Well, you 5 know, the financial payoff is in 40 or 50 years? 6 We don't know what the world is going look 7 like in two years. 8 ASSEMBLYWOMAN CORWIN: Okay. I agree. 9 Thank you, Gavin. 10 SENATOR MAZIARZ: Thank you, Gavin. We 11 appreciate it. 12 GAVIN J. DONOHUE: Thank you. 13 SENATOR MAZIARZ: Our next witness is 14 Paul Haering from Central Hudson Gas & Electric. 15 PAUL E. HAERING: Good afternoon. 16 With me today is Ray Kinney. He's from NYSEG 17 (New York State Electric & Gas). He was also a key 18 member of the STARS Initiative, as well as the 19 New York Transco proposal that was submitted with 20 the "energy highway." 21 Chairman Maziarz and members of the 22 Senate Energy and Telecommunications Committee, my 23 name is Paul Haering. I'm am employed at 24 Central Hudson. 25 I just want to be clear: There was a 1 statement that was made by one of the witnesses 2 today about Central Hudson being aligned with the 3 TDI project. 4 We are not. 5 We are an investor-owned utility that serves 6 electric-and-gas customers in the Hudson Valley. 7 So, I am the vice president of engineering 8 and system operations for Central Hudson. 9 I also acted as chair of the committee that 10 was the STARS study; the New York State Transmission 11 Assessment and Reliability Study. 12 This was a study that began in 2008, and was 13 conducted and funded by the state's transmission 14 owners, with technical support from New York's 15 Independent System Operator, and, system modeling 16 consultant, ABB. 17 The state's transmission owners who 18 participated in the study included: Central Hudson, 19 Con Edison, the Long Island Power Authority, 20 National Grid, the New York Power Authority, and 21 New York State Electric & Gas, Orange and Rockland 22 and Rochester Gas and Electric. 23 This is the same group of companies acting 24 together under the name "New York Transco," and 25 utilizing the results of this study that provided a 1 comprehensive proposal of projects as part of the 2 Governor's Energy Highway Request for Information 3 process. 4 The STARS study thoroughly examined 5 New York's electric transmission system, with a 6 focus on identifying the system's infrastructure 7 needs for approximately 20 years into the future, 8 including addressing replacement of aging system 9 components, maintaining system reliability, and 10 providing rational expansion to ease system 11 congestion. 12 The STARS study is seen as augmenting the 13 existing 10-year planning process that is 14 administered by the New York ISO. 15 The study took a close look at possible 16 transmission investments, seeking to identify those 17 investments that could provide customer benefits 18 over the long term. 19 The study also considered the status of 20 existing assets. And utilizing a high-level, 21 condition-based assessment, found that nearly 22 4,700 of the 11,600 miles of high-voltage 23 transmission lines in the state may require 24 replacement in the next 30 years. 25 The transmission owners support the 1 competitive energy markets administered by the 2 New York ISO as the best way to provide reliable, 3 low-cost, and competitively priced supply to the 4 state's electric consumers. 5 With careful and coordinated planning, and a 6 long-term approach to developing solutions to future 7 energy needs, the energy issues that New Yorkers 8 face can be turned into opportunities. 9 Some of the benefits that New York Transco's 10 proposed projects provide, include: 11 First, increasing power-flow transfer 12 capability. 13 Increasing power-flow transfer capability 14 throughout the state, through the strategic 15 expansion of the system, will help to facilitate the 16 economic transfer of energy from upstate 17 generation-rich regions to the downstate load 18 centers. 19 Second, use of existing rights-of-way. 20 Existing transmission line rights-of-way can 21 be used for the vast majority of the proposed 22 projects. This offers the least-cost and quickest 23 solution for project development, and minimizes the 24 environmental impact associated with siting and 25 construction. 1 Third, improve reliability. 2 Improving the robustness of the electric 3 transmission system with upgraded and new lines 4 improves the reliability of the entire electric 5 system, and will help to maintain system reliability 6 for generations to come, especially as downstate 7 load increases and renewable generation resources 8 are added upstate. 9 And, fourth, create jobs and economic growth. 10 Developing an improved "energy highway" will 11 create jobs and facilitate economic growth by 12 providing New York with the transmission 13 infrastructure needed to support tomorrow's business 14 needs. 15 In addition to creating thousands of 16 construction jobs, it will generate or maintain 17 millions of dollars of property-tax revenues that 18 will primarily benefit New York's upstate regions. 19 New York -- excuse me. 20 The transmission owners believe that the 21 New York Transco proposal is a comprehensive 22 response to the issues identified for discussion 23 here today, as well as the goals of 24 Governor Andrew Cuomo's Energy Highway Initiative, 25 specifically: 1 Maintaining fuel diversity and reliability in 2 the energy markets; 3 Addressing transmission-system bottlenecks or 4 congestion points that are preventing power flow 5 from flowing easily from upstate to downstate; 6 Considering excess electrical-generation 7 capability in Upstate New York; 8 Addressing the impacts of future 9 generation-facility retirements; 10 And, protecting existing, and creating new 11 jobs, in the energy-generation and transmission 12 industry. 13 The New York Transco proposal includes a 14 portfolio of 18 transmission projects categorized 15 into four distinct groupings: 16 Immediately actionable projects; 17 Actionable projects; 18 Projects to address potential Indian Point or 19 downstate generation retirements; 20 And projects to enable wind generation. 21 The "immediately actionable" and "actionable" 22 projects work together to provide a broad range of 23 benefits. These projects facilitate the flow of 24 power from existing generation sources in New York's 25 western and northern regions to the downstate 1 regions of the Lower Hudson Valley, New York City, 2 and Long Island. 3 The net benefit to the state's consumers of 4 these improved energy flows is estimated to be 5 $175 million annually. 6 This benefit is a direct result of enabling 7 lower-cost economic generation to replace 8 higher-cost generation more widely throughout 9 New York. 10 In addition, this increased transmission 11 capacity will facilitate fuel diversity by allowing 12 more renewable energy to be transmitted downstate, 13 and enable clean-burning fossil fuels to play a 14 greater role in meeting the long-term energy needs 15 of the state. 16 Importantly, these projects provide increased 17 opportunities for existing generation resources to 18 access new markets, and, thus, aid in maintaining 19 these important resources and associated employment 20 in upstate communities. 21 The "immediately actionable" and "actionable" 22 projects also provide tangible reliability benefits, 23 the result of a more robust transmission system. 24 These benefits include increased emergency 25 transfer capability, improved resource adequacy, and 1 a reduction in the amount of installed generation 2 capacity that would be required to maintain system 3 reliability. 4 The reduction in the level of future 5 generation needed to maintain system reliability is 6 estimated to provide consumers annual savings in the 7 range of 55 million to 218 million per year. 8 The group of projects that address 9 reliability concerns stemming from the retirement of 10 downstate generation, when coupled with the 11 "immediately actionable" and "actionable" projects, 12 increase the transmission capacity into the 13 Lower Hudson Valley, New York City, and Long Island. 14 As such, the projects provide an estimated 15 transmission security benefit of almost 16 2,000 megawatts, which will ensure the transmission 17 system operates adequately during emergency 18 conditions. They also can help to address 19 transmission security and resource adequacy needs 20 that would result if generation resources in these 21 regions were to shut down. 22 The final grouping of projects, projects to 23 enable wind generation, which was identified in the 24 New York ISO's 2010 Wind Study, enabled the full 25 energy output of wind facilities in Jefferson County 1 and Western New York. 2 These projects, again, coupled with the 3 "immediately actionable" and "actionable" projects, 4 provide a twofold need. 5 First, the underlying 115-kV and 230-kV 6 transmission systems are reinforced or upgraded, 7 allowing for the constrained wind energy to be 8 delivered to the bulk system. 9 Second, the transfer capability of the bulk 10 system is increased to permit the energy to more 11 freely flow to downstate markets. 12 The New York Transco proposal also provides 13 substantial job creation benefits to the upstate 14 region. 15 The current estimated costs for the Transco 16 proposed projects is 2.9 billion in current-year 17 dollars. 18 Using publicly available job and economic 19 impact factors, the level of investment would 20 support an estimated 12,000 direct 21 full-time-equivalent jobs, and nearly 38,000 total 22 full-time-equivalent jobs, and stimulate an 23 estimated 7.2 billion of total economic activity. 24 Much of the job and economic activity is 25 expected to directly benefit New York. 1 Beyond this activity, directly related to the 2 transmission construction, is the benefits related 3 to the enabling additional renewable-energy 4 development in Upstate New York. 5 Based on approximately 2,300 megawatts of 6 renewable projects, this could add an additional 7 8,000 direct full-time-equivalent jobs for 8 construction, 300 permanent jobs, and more than 9 4.6 billion in economic activity. 10 The Transco projects are also estimated to 11 increase local tax revenue, primarily in the upstate 12 and western regions of New York, by approximately 13 60 to 90 million per year. 14 The New York Transco projects provide 15 considerable environmental benefits as well. These 16 benefits are measured in terms of reduced generation 17 emissions resulting from the ability to dispatch 18 cleaner resources. 19 The projects' estimated annual reduction in 20 CO2 and NOx emissions is more than 370,000 tons and 21 200,000 tons, respectively. 22 Additionally, the projects represent 23 approximately 856 transmission-circuit miles, the 24 majority of which is within or adjacent to existing 25 rights-of-way. 1 If constructed on new rights-of-way, these 2 projects would require approximately 29 square miles 3 of property. However, by leveraging the existing 4 corridors, only 2.9 square miles is required, a 5 reduction of 90 percent. 6 In summary, as has been detailed, the 7 proposed New York Transco projects provide a broad 8 range of benefits for the State and its energy 9 consumers. The proposal addresses all of the 10 objectives identified in the Energy Highway Request 11 for Information, and provides a comprehensive and 12 achievable plan for modernizing the state's 13 transmission system and eliminating bottlenecks. 14 Thank you for the opportunity to testify 15 before you today on the Transco proposal. 16 And, we're happy to address any questions. 17 SENATOR MAZIARZ: Thank you very much, 18 Mr. Haering, for, first of all, coming from 19 downstate up here to testify. 20 Just, I think it's very stark, and you 21 pointed out here, you estimated approximately 22 30,000 jobs that could be created with the 23 "energy highway" and the Transco project, versus, I 24 believe, one of the previous testimony from 25 Mr. Jessome talked about, 2,400 jobs with the 1 TD -- with the Champlain-Hudson project. 2 I thought it was a stark contrast. 3 PAUL E. HAERING: Yes, Senator, we relied on 4 a publicly available document. It's a study that's 5 called the "Wire Study." It was used in the RFI 6 process, that takes the -- calculates the economic 7 benefits attributed to transmission projects, both 8 in direct and indirect jobs. 9 So that's the data point that we used, that 10 was also part of the RFI process. 11 SENATOR MAZIARZ: I mean, even if you were 12 off by 50 percent, it would still be a stark 13 contrast. 14 And I hope you're not off by 50 percent, by 15 the way. 16 PAUL E. HAERING: We hope so as well. 17 SENATOR MAZIARZ: Senator Ritchie? 18 SENATOR RITCHIE: No questions. 19 SENATOR MAZIARZ: Senator O'Mara? 20 SENATOR O'MARA: No. 21 Thank you very much. 22 SENATOR MAZIARZ: Assemblywoman Corwin? 23 ASSEMBLYWOMAN CORWIN: No questions. 24 SENATOR MAZIARZ: Thank you very much, Paul. 25 We appreciate it. 1 Our next testimony is going to be coming from 2 the New York Independent System Operator, Tom Rumsey 3 and Rick Gonzalez. 4 Thank you, Tom and Rick, for being here 5 today. 6 THOMAS RUMSEY: Thank you, sir. 7 One of the joys of going late is trying to 8 sound unique in our testimony, so we'll give it a 9 shot. 10 [Laughter.] 11 THOMAS RUMSEY: Good afternoon, 12 Chairman Maziarz and members of both the Senate and 13 the Assembly Energy Committees. 14 My name is Tom Rumsey, and I serve as the 15 vice president of external and regulatory affairs 16 for the New York Independent System Operator. 17 With me today is Rick Gonzales, senior vice 18 president and chief operating officer of the NYISO. 19 He and his staff are responsible for the 20 New York State's grid reliability, market 21 operations, and system planning. 22 I'd like to start by thanking you for the 23 opportunity to participate in today's hearing. 24 At the NYISO, we take our responsibility to 25 serve as a source of objective information on energy 1 issues very seriously, and appreciate the leadership 2 of this Committee in raising awareness of the 3 important energy issues facing our state. 4 The NYISO is an independent, non-profit 5 corporation responsible for performing several vital 6 functions for New York. 7 Our primary mission is to reliably operate 8 New York's bulk electric system in accordance with 9 all national, regional, and state reliability 10 requirements. 11 We also administer New York's competitive 12 wholesale electricity market to satisfy electrical 13 demand, and provide open and fair competition. 14 In addition, we conduct comprehensive 15 power-system planning to identify long-term needs, 16 and solicit market-based solutions to meet 17 forecasted requirements. We then evaluate those 18 projects as they enter the power grid and the 19 wholesale energy market. 20 We also serve as the technical resource for 21 the New York State Planning Board, having been named 22 as a non-voting member under the 2009 law. 23 We have provided a written testimony in 24 response to the issues identified in your invitation 25 letter. 1 My hope is, you'll find the level of detail 2 in that response to be of sufficient detail, and of 3 value. 4 For purposes of today's hearing, I'd like to 5 just cover the four key points we made -- 6 SENATOR MAZIARZ: Sure. 7 THOMAS RUMSEY: -- and then have Rick and I 8 take any questions that you might. 9 SENATOR MAZIARZ: Thank you. 10 THOMAS RUMSEY: So the first grid -- the four 11 key points we made were: 12 First, grid reliability is essential and 13 remains a collaborative effort with New York 14 stakeholders and policymakers. Working with state, 15 regional, and federal authorities, the primary focus 16 of the NYISO is to sustain and enhance the 17 reliability of New York's bulk electric system. 18 In terms of supply and demand, the New York 19 outlook for -- or, the outlook -- near-term outlook 20 for New York is positive. Currently, there is 21 excess capacity across the state to meet our energy 22 demand. 23 Since the inception of New York's competitive 24 marketplace for electricity 12 years ago, the 25 significant investment in generation assets, the 1 development of new demand response resources, and 2 expansion of interstate transmission have 3 contributed to a more reliable system. 4 However, after years of growth, demand for 5 electricity dramatically declined in 2008 and 2009 6 at a scale not seen since the Great Depression. 7 This is due to a slow economic -- or, excuse 8 me. 9 We have experienced modest growth since that 10 time, but we are still at or below pre-recession 11 levels. This is due to a slow economic recovery in 12 the State's energy-efficiency programs. 13 According to our latest analysis, 14 New York State has sufficient reserves to meet 15 reliability requirements and forecasted demand 16 through 2020. 17 Our second key point is, regulatory certainty 18 and clear coordinated public policy are fundamental 19 for continued private investment. 20 For the energy industry, this starts at the 21 national level. 22 As an example: Uncertainty over the 23 extension of the protection tax credit for wind 24 power has an entire industry on hold. 25 Historically, when the production tax credit 1 has expired, the nation has seen as much as a 2 90 percent decline in wind generation. 3 We do not necessarily endorse the production 4 tax credit, but I use that simply as an example of 5 the impact that regulatory uncertainty can have on 6 an industry. 7 This year, they're expecting 12 gigawatts of 8 installations. Next year, less than one, when the 9 PTC expires. 10 Regulatory uncertainty also makes development 11 of an investment in new technologies more difficult. 12 Fortunately, New York State has recently 13 taken important steps toward providing more 14 certainty. 15 The Power New York Act of 2011, sponsored by 16 yourself, Senator Maziarz, reestablished the State 17 Siting Board for major electric-generating 18 facilities. 19 By ending a nearly decade-long absence of a 20 State power-plan siting law, this new act sends a 21 clear, consistent signal to potential developers. 22 Similar, in 2009, the Legislature acted to 23 reestablish the New York Energy -- State Energy 24 Planning Board. With its comprehensive and 25 inclusive planning process, the development of the 1 State energy plan offers an important venue for the 2 coordination and integration of economic, 3 environmental, and energy considerations in the 4 development of State policy decisions. 5 However, it's critical that the State of 6 New York consider both the cumulative effects that 7 regulations and policies can have, and the time 8 necessary for the industry to respond. 9 Recognizing those two key factors provides 10 the framework for sustaining system reliability, as 11 well as limiting short-term price volatility for 12 ratepayers. 13 Our third key point, is that electric-system 14 planning will play an increasingly important role 15 for grid reliability, economic development, and the 16 integration of public-policy objectives. 17 Electric-system planning to NYISO is a 18 continuous process of monitoring, updating, and 19 evaluating future grid conditions, based on changing 20 weather patterns, economic forecasts, and 21 public-policy initiatives. 22 In conjunction with our stakeholders, we 23 conduct a biannual comprehensive system-planning 24 process for the bulk power system. This produces -- 25 this process identifies grid-reliability needs and 1 provides economic data to developers, stakeholders, 2 regulators, and policymakers. 3 This was typically done with a sole focus on 4 maintaining grid reliability. 5 Recently, we added economic transmission 6 planning to enhance system efficiency for 7 ratepayers. 8 This year, the Federal Energy Regulatory 9 Commission, in its Order 1000, has established a new 10 process to coordinate transmission planning to 11 integrate public policy. 12 This order requires system planners to 13 evaluate emerging transmission needs based on 14 federal and state laws and regulation. 15 It gives it -- again for example purposes 16 only, a state law that would establish a renewable 17 portfolio standard could lead to transmission 18 projects moving forward based on supporting that 19 policy goal. 20 Our fourth, and final, point, is New York 21 shouldn't simply replace, but upgrade its aging 22 infrastructure. 23 Nearly 60 percent of New York's power-plant 24 capacity and more than 80 percent of New York's 25 high-voltage transmission lines were built prior to 1 1980. 2 Modernizing the New York power grid 3 represents a tremendous opportunity to retain fuel 4 diversity, help meet future reliability needs, and 5 grow our economy. 6 The reliability of the electric grid, the 7 quality -- and quality and dependability of power it 8 provides, is essential to New York's success in the 9 worldwide competition for jobs. 10 You just heard a significant briefing on the 11 STARS projects, so I'll skip through all of that, 12 other than to confirm we were the technical resource 13 for that. And we don't necessarily endorse specific 14 projects, but we did provide our technical input to 15 that analysis. 16 Governor's -- Governor Cuomo's call for a 17 $2 billion private-sector-funded "energy highway" 18 sends a strong signal about New York's interest in 19 addressing our energy and infrastructure needs. 20 The data and analysis developed by the 21 NYISO's planning process and the STARS report are 22 helping to inform the implementation of the 23 Governor's initiative. 24 It is encouraging to note that the 25 Energy Highway Initiative envisions developing the 1 steps consistent with competitive wholesale energy 2 markets. 3 In closing, I would just like to reiterate 4 the four key points: 5 Maintaining grid reliability is our primary 6 focus, and requires a collaborative effort involving 7 the NYISO, our stakeholders, and public 8 policymakers. 9 Second: Regulatory certainty and clear 10 coordinated public policy are fundamental for 11 continued investment in the transmission of 12 electrical generation. 13 Third: Power-system planning will play an 14 increasingly important role for grid reliability, 15 economic development, and, now, the integration of 16 public-policy objectives. 17 And, finally: New York has an aging 18 infrastructure. Modernizing the grid represents a 19 tremendous opportunity to meet our future 20 reliability needs and grow the economy. 21 Thank you, Chairman Maziarz, for this 22 opportunity, and we stand prepared to answer any 23 questions. 24 25 1 SENATOR MAZIARZ: Mr. Gonzalez, do you 2 have -- 3 RICK GONZALEZ: No. I'm available to respond 4 to questions. 5 SENATOR MAZIARZ: Okay. 6 RICK GONZALEZ: And thank you for the 7 opportunity. 8 SENATOR MAZIARZ: Well, first of all, we 9 thank you very much. 10 And, understanding that you are an 11 independent organization. Sometimes independent 12 organizations don't like to take stands on very 13 controversial issues, particularly when it involves, 14 you know, power generation. But, you know, I think 15 it's important, since it's -- you know, if someone 16 pulls a switch and the lights don't go on, I think 17 the ISO is going to get a lot of the blame for it. 18 So, it's important that the lights go on when 19 the switch is pulled. 20 So, you know, could you just, you know, give 21 us your opinion on Champlain-Hudson versus the 22 "energy highway"? 23 You know what you think the impact of each 24 would be, either positively or negatively, on a 25 long-term reliability for the grid in New York? 1 THOMAS RUMSEY: Yeah, go ahead, Rick. You 2 can tackle that one. 3 [Laughter.] 4 RICK GONZALEZ: Well, they're -- they are -- 5 Senator, they are two entirely different projects. 6 One is -- one is updating and improving the 7 state's transmission system, to allow existing 8 suppliers to use the New York State transmission 9 system, in a sense, levelizing the playing field, 10 and providing access to the statewide electricity 11 market. 12 I know you're aware that there have been, in 13 the past, transmission-congestion bottlenecks that 14 preclude otherwise economic resources from reaching 15 the New York City, Long Island, and Hudson Valley 16 electricity markets. 17 In contrast, the TDI proposal is a 18 transmission line that implies there are capacity 19 resources that -- or, energy resources from the 20 province of Québec that would meet New York City 21 needs. 22 At the highest level, both of these projects 23 would be beneficial to reliability. And the ISO is 24 indifferent to whether resources, such as 25 demand-response generation or transmission, can be 1 used to meet reliability requirements. 2 That being said, it is important to 3 understand that there are certain protections in the 4 ISO rules, to ensure the competitiveness of the 5 market; and, specifically, for those resources that 6 connect to the New York City area. 7 So, the ISO would be obligated to evaluate a 8 project, such as TDI, from its cost -- from its 9 actual-cost perspective, to see if it were 10 economic -- it were economic to supply one of the 11 products in the New York ISO market, which is 12 capacity. 13 So, the New York ISO would evaluate that 14 project, to see if it was deemed economic from the 15 ISO's perspective. 16 As such, that determination could -- that 17 determination, whatever it may be, could limit the 18 reliability benefit of the Champlain-Hudson project. 19 SENATOR MAZIARZ: Wouldn't it be, though -- 20 where I was going with that, wouldn't it be the 21 opinion of the ISO, that long-term energy policy, 22 long-term reliability of the grid, wouldn't it be 23 better to be more dependent upon in-state generation 24 than it would be, not just out-of-state generation, 25 but out-of-the-country generation? 1 I mean, I would just think, you know, that, 2 again, for long-term energy policy, that would be 3 more positive for an independent body like yourself. 4 I mean, I realize, you know, that everybody 5 that has testified before this, and after this, 6 has -- you know, has some skin in the game, from a 7 certain respect. 8 And I know that -- that, you know, the ISO is 9 interested only in making sure that that power is 10 available in all areas of the state that they need 11 it. 12 What we have here is, downstate needs it, 13 we've got the capacity to produce it up here. We 14 just have to move it -- be able to move it from down 15 here -- from up here to down there. 16 THOMAS RUMSEY: That's correct. 17 To answer your question directly, Senator, 18 I think, when you're talking policy versus an 19 economic project, if you look at the state of the 20 grid as it is today, as you just discussed, where 21 you've got a lot of the generation in the north, a 22 lot of the potential for renewables in the north and 23 in the west, where 53 percent, roughly, is down in 24 city, it's a matter of connecting those two. 25 If you look at the aging infrastructure and 1 the policy, and decisions that are going to be 2 coming around that, the traditional bottlenecks in 3 our transmission system happens to be some of the 4 first areas that we're going to have to address 5 based on the age of those transmission lines. 6 So, from our perspective, when you -- as a 7 policy view, when it comes time to replace those, to 8 not also improve the ability to move more power than 9 it currently does today and alleviate those choke 10 points, is the single biggest policy-challenge, in 11 our view, opportunity for New York. 12 It will help retain the fuel diversity. It 13 will help competitive markets. It will help the 14 generation throughout the state to compete on a 15 level playing field. 16 And, the "energy highway," having not looked 17 at the projects until they're published, obviously, 18 is seeking to address that issue, and we fully 19 support it. 20 SENATOR MAZIARZ: Thank you. Thank you. 21 Senator Ritchie? 22 SENATOR RITCHIE: No questions. 23 Thank you. 24 SENATOR MAZIARZ: Senator O'Mara? 25 SENATOR O'MARA: With regard to those 1 bottlenecks you're talking about, and the 2 infrastructure being 30-plus years old, has the 3 technology and capabilities improved over that 4 period of time to provide that greater handling of 5 megawatts over the same basic infrastructure that's 6 there; in other words, within the rights-of-way that 7 are there? 8 THOMAS RUMSEY: I'll answer the 9 rights-of-way, and then let Rick get into the 10 technology because, I promise, I don't do math very 11 often. 12 But, you know, one of the -- I think one of 13 opportunities -- one of the challenges transmission 14 has, is that, if you're not using an existing 15 right-of-way, it makes it very challenging to build 16 it. 17 And, the initial projects identified by the 18 STARS currently exist -- or, utilize all existing 19 rights-of-way, with only potential of some 20 modification to the width if they go too much higher 21 on the path. 22 So, the opportunity is more likely, if you're 23 using an existing energy right-of-way, which most of 24 the STARS projects currently do, and I can let Rick 25 talk to the transmission technologies. 1 RICK GONZALEZ: Well, the New York 2 transmission owners are the experts in the actual 3 construction and design capabilities, but it is my 4 understanding that replacing -- or, using existing 5 right-of-ways, and by replacing lower-voltage 6 transmission lines with higher-voltage transmission 7 lines in those same existing corridors, improves the 8 power-transfer capability significantly. 9 SENATOR O'MARA: We've heard a lot of 10 testimony today about the power-producing 11 capabilities of upstate, and the limits of the 12 transmission to get it downstate where it's needed. 13 Are you in agreement that we have sufficient 14 production capabilities across New York State if we 15 can get our transmission facilities upgraded? 16 RICK GONZALEZ: There are currently 17 sufficient capability to meet New York State's 18 demands. 19 We had some hot-weather events this summer, 20 and we utilized the Somerset asset here, as well as 21 other upstate resources, so those resources play an 22 important part in meeting the reliability needs in 23 New York State. 24 THOMAS RUMSEY: I think it's important, also, 25 if you could alleviate all congestion in the state, 1 just make a magic wand and you can all compete 2 evenly, there's a very disruptive pricing mechanism 3 right now in the energy industry, and that's the 4 cost of natural gas. 5 All of generation has to compete, and win in 6 the competitive marketplace. 7 And right now, with low natural gas costs, it 8 makes some, particularly fossil generation, very 9 challenged in that competition. That's nationally. 10 Across the country, 10 percent of the coal 11 has been replaced by natural gas. 12 If you look at our interconnection queue, 13 what's coming to New York State is predominantly 14 natural gas, wind, with some improvements to the 15 nuclear -- current existing nuclear fleet. 16 So, if you look at what developers are 17 bringing to the NYISO to evaluate, it's 18 predominantly natural gas. 19 And, at $3 gas prices, it's incredibly 20 challenging for other assets, particularly fossil 21 assets, to compete. 22 SENATOR O'MARA: Yeah, but, as we know, and 23 as we see the economic cycles we go through, that's 24 not likely to remain -- 25 THOMAS RUMSEY: Absolutely. 1 SENATOR O'MARA: -- the case for, certainly 2 not forever. The question is: How long? 3 And, it is a benefit to us across the state 4 to have this diverse fuel supply for when those 5 conditions change. 6 Is that correct? 7 THOMAS RUMSEY: That's absolutely correct. 8 For the second time in my life, I'll agree 9 with Gavin. 10 [Laughter.] 11 THOMAS RUMSEY: The balanced-portfolio 12 approach has to be the way that you approach energy. 13 It simply has to be. 14 SENATOR O'MARA: Well, my goal today was to 15 get you to agree with Gavin, so I'm done with 16 questions now. 17 [Laughter.] 18 THOMAS RUMSEY: All right. Thank you, sir. 19 SENATOR MAZIARZ: Assemblywoman? 20 ASSEMBLYWOMAN CORWIN: (Shakes head.) 21 SENATOR MAZIARZ: Thank you very much, Rick 22 and Tom Rumsey. We appreciate you coming. 23 THOMAS RUMSEY: Thank you very much. 24 RICK GONZALEZ: Thank you. 25 1 SENATOR MAZIARZ: Our next testimony is going 2 to be offered by Ken Pokalsky of The Business 3 Council. 4 KENNETH J. POKALSKY: Good afternoon. 5 Thanks, Senator, for the invitation to 6 participate today on behalf of The Business Council. 7 And I also want to thank the panelists for 8 sticking it out, because it's been a long hearing, 9 but, very important testimony on very important 10 issues. 11 So, on behalf of The Business Council, I 12 appreciate the opportunity to come today. 13 I'm joined by Darren Suarez, who manages 14 our -- both our energy and environmental program on 15 a day-to-day basis. 16 The Business Council has about 3,000 members 17 across New York State. It's a very diverse 18 membership. 19 And in the energy arena, we represent 20 generators, transmission companies, local utilities, 21 and the vast majority of our members are industrial 22 and commercial energy consumers. 23 And despite occasional disagreements among 24 those members and those sectors, which is not 25 surprising, given the zero-sum tradeoffs that are 1 often inherent in the types of issues we work on in 2 the energy arena, our members have uniformally -- 3 uniformly supported the advancement of a New York 4 State energy policy dedicated to the development of 5 cost-competitive and reliable energy. 6 A major focus -- our major focus is on 7 necessary improvements to the state's 8 "energy highway." 9 The last major cross-state transmission 10 project was built in the 1980s. 11 And it was discussed earlier, a recent 12 assessment of the state's transmission needs 13 indicates that there's nearly 5,000 miles of 14 in-state lines that will approach their -- the end 15 of the useful life and will require replacement over 16 the next 30 years. 17 And while the need for transmission upgrades 18 has been in the news lately, over the last couple of 19 years, unnoticed by many New Yorkers, the state has 20 experienced a significant shift in our generation 21 fuel diversity. 22 Simply put, it has been mentioned numerous 23 times today, some coal- and petroleum-based plants 24 are no longer operating, or operating at reduced 25 levels, due to combined factors, including low 1 natural gas prices, and increased cost of 2 environmental compliance. 3 We believe the State Energy Committee is very 4 correct in reviewing New York State's transmission 5 and generating needs together. 6 The State can't maintain fuel diversity and 7 ensure reliability without acknowledging that more 8 than half of the demand for electric power in 9 New York occurs in the New York City metropolitan 10 area, while more than 60 percent of the power supply 11 comes from generators located primarily in 12 Upstate New York. 13 Now, I wanted to briefly touch on four topics 14 that you asked about in the hearing notice, today, 15 and I'll skip through the testimony relatively 16 quickly -- 17 SENATOR MAZIARZ: Thank you. 18 KENNETH J. POKALSKY: -- so, I will not read 19 it. 20 First, and foremost, for our membership, it's 21 critical, when you're looking at any aspect of 22 energy policy, to do so in the acknowledgment that 23 New York State energy consumers -- residential, 24 commercial, and industrial -- pay among the highest 25 electric power prices in the nation. It's been that 1 way for -- for several generations. 2 Recent data: Residential rates are about 3 60 percent above the national average. Commercial 4 about 65, industrial about 40 percent, above the 5 national average. 6 Specific projects or policies that are 7 dependent upon either new energy assessments or, 8 potentially, above-market power-purchase agreements, 9 or any other type of additional consumer-funded 10 subsidies, in our view, need to be considered in the 11 context of these cost issues. 12 And, power costs, you know, repeatedly, we 13 hear from our member companies, are among the most 14 significant costs-of-doing-business issues facing 15 New York State's business community. 16 There are many things that can be done to 17 address the cost issues in New York State. 18 Regulatory reform, we've just begun to 19 scratch the surface on looking at the -- both, the 20 nature of the scope and the requirements of 21 environmental mandates and other regulatory costs 22 that add to the cost of doing business in 23 New York State. 24 State and local taxes are certainly in there. 25 If you look at the major drivers of the cost 1 differences in New York State, energy and electric 2 power system, fuel mix is number one. As mentioned, 3 our relatively high reliance on natural gas. 4 And, state and local taxes are number two. 5 The most significant differential in the tax 6 arena being, real property taxes, and the cost of 7 property taxes on generation and transmission 8 facilities. 9 So we need to be always mindful, when we talk 10 about new programs and initiatives: Are we adding 11 to or reducing State-imposed costs on electric-power 12 system? 13 Second topic is transmission. 14 Business Council supports transmission 15 initiatives that will result in delivery of 16 reliable, cost-competitive energy. 17 We do think there's a number of ways to 18 approach those goals. 19 As has been discussed, there's congestion 20 along our 11,600 miles of high-voltage transmission 21 lines in the state. 22 With the -- one-third of the state's electric 23 load in New York City, we simply don't have 24 sufficient capacity to move power from downstate to 25 upstate. 1 The calculated opportunity costs, or added 2 cost of transmission, due to this congestion, was 3 calculated at about $1.2 billion in 2010. 4 We need to commit to projects that will 5 improve the overall capacity to the state's 6 transmission system, like those contained in the 7 recently completed STARS report. 8 And I'm not going to go into those in detail. 9 You've heard about them in previous testimony. 10 The proposed -- this detailed study, 11 three years in development, outlines specific and 12 practical electric-transmission projects that will 13 bolster the power grid, provide economic benefits, 14 support development of renewable resources, and 15 ensure a robust power system for New Yorkers. 16 Specifically, one of the issues this 17 Committee asked about, in our view, the proposed 18 campaign -- or, Champlain-Hudson Power Express is a 19 one-off transmission project that does not result 20 from this comprehensive planning initiative. 21 It's such, in our analysis, does not address 22 many of the objectives of the STARS report, and will 23 circumvent, rather than improve, the state's 24 transmission system. 25 The Business Council does not support the 1 project. 2 And trust me, that is not an easy conclusion 3 for us to come to. In a -- The Business Council, I 4 think, is one of the most aggressive and consistent 5 advocates for new capital investment in 6 New York State, and we don't have many multi-billion 7 dollar proposed private-sector investment projects 8 in the state. But, based on input from member 9 companies, and our review of the project, we do not 10 support Champlain-Hudson Power Express. 11 Third topic: Fuel diversity. 12 One of the important facts that was -- we 13 think, lost, or simply ignored, in the run-up for 14 New York State entering into RGGI, and I think it's 15 ignored in some of the repeated calls we hear, on 16 the need for New York State to take new initiatives, 17 or additional initiatives, to reduce greenhouse-gas 18 emissions, is that New York State has been -- had 19 been, continues to be, one of the nation's most 20 fuel-diverse states when it comes to electric -- its 21 electric power system. 22 And, one of the states -- one of the lowest 23 carbon-emitting states from its electric power 24 system, with nearly -- not quite, but nearly 25 50 percent of our power -- our base-load power 1 generation come from -- coming from non-emitting 2 sources: major hydro plants, nuclear-power plants, 3 and recent deployment of new renewables. 4 We agree the State must support policies and 5 encourage fuel diversity, to avoid, you know, 6 additional disruptions or price hikes if we come too 7 reliant on one source of power. 8 Perhaps, more than any other single source, 9 the emergence of new supplies of natural gas, from 10 what I'll call "non-traditional sources," 11 unfortunately, not yet from those non-traditional 12 sources in New York State -- is having a significant 13 impact on the electrical system. 14 These new natural gas resources, primarily 15 from shale formations, are transforming the supply 16 and price outlooks for natural gas in the 17 competition among energy options. 18 These developments in the natural gas arena 19 can be expected to affect the mix of fuels used to 20 generate electricity, as well increase the need for 21 stronger coordination between electric-grid 22 operators and natural gas industry. 23 Due to what's happening in the natural gas 24 market, some coal and oil plants may no longer be 25 operating, as I said earlier, due to the combination 1 of low gas prices and the increase in cost of 2 environmental compliance. 3 And some -- by some predictions, many -- 4 12 in-state coal and mixed-fuel facilities will 5 retire or be mothballed this year. 6 These retirements will have a significant 7 adverse impact on local employment tax rates, and we 8 believe overall grid reliability. 9 The State should critically review these 10 retirements to determine steps that can mitigate, 11 prevent, or to ter [sic] their closure -- or, deter 12 closure, including, as Senator Maziarz discussed 13 earlier today, incentives for, and reducing barriers 14 to, repowering existing plants. 15 As always, we urge that any policy 16 initiatives be reviewed with an eye to the potential 17 impact on rates for residential and business 18 consumers. 19 And, fourth, I say "Other Policies," but, it 20 really -- I want to speak to, specifically, the 21 issue of RGGI. 22 Prior to the end of the 2012 legislative 23 session, there's some discussion in Albany, and in 24 the northeast, about initiatives that would 25 increase, and were designed to increase, the cost of 1 RGGI allowances, and use additional proceeds to do a 2 number of things, including, perhaps, assist 3 communities with a transition from power-generating 4 communities to power-consuming communities. 5 Generally speaking, we strongly recommend 6 against these or other proposals to increase or 7 inflate the cost of RGGI compliance. 8 The RGGI program has resulted in significant 9 cost increases to business and residential 10 customers, and to power generators, as we've heard 11 from earlier participants in this hearing, while 12 contributing to reduced fuel diversity, and has done 13 little, if anything, to address the global 14 challenges of climate change. 15 So that's a set of brief comments on a 16 handful of the issues the Committee had asked about. 17 Darren and I, we appreciate the opportunity 18 to be here today, and look forward to any questions 19 or comments you have on these or other topics. 20 SENATOR MAZIARZ: Thank you very much, Ken, 21 we appreciate it. And we appreciate the work 22 The Business Council does year-round. 23 And I'd just like, I don't really have a 24 question, but an observation. 25 I think it's very significant that 1 The Business Council, as you very adeptly pointed 2 out, doesn't very often oppose investment in 3 New York State. 4 But, clearly, this particular type of 5 investment probably has more long-term negative 6 impact on just the energy market, on job creation, 7 and particularly in Upstate New York. I'm talking 8 about the Champlain-Hudson line. 9 So, I would just make that as an observation. 10 I appreciate the frankness of The Business 11 Council on that point. 12 KENNETH J. POKALSKY: Sure. 13 SENATOR MAZIARZ: Senator Ritchie? 14 SENATOR RITCHIE: You talked about what 15 New York can do to reduce energy costs, one being, 16 regulatory reform. You mentioned property taxes. 17 Can you give me a few other examples of what 18 would be helpful? 19 KENNETH J. POKALSKY: Well, some of the 20 big-picture issue -- or, one of the big-issue 21 issues, we have a -- at least a draft game plan, if 22 you will, for promoting -- or, identifying these 23 major transmission needs. 24 We now have to look at what the State can do 25 to promote investment or eliminate barriers to 1 investment in new transmission. 2 Streamlining Article 7. 3 We've had legislation in the past, like we 4 did in Article 10, to give expedited review to 5 transmission projects in existing right-of-ways that 6 would reduce -- or, produce a more efficient 7 delivery of electric power. 8 Making sure that project reviews happen in a 9 timely fashion. 10 We just had, last year -- about a year ago, 11 we had 10 regional economic development councils 12 talk about barriers to new investment in their 13 regions. And every one of them said, state and 14 local land use and project-review processes delay or 15 discourage new capital investment in New York State. 16 You know, a streamlined Article 7, and other 17 expedited reviews, whether it's a need for a SEQR 18 review for a project, for coastal zone for when 19 we're impacting navigable waterways, making these 20 things happen on a timely fashion, with clear set of 21 rules, rules that we don't ignore, because it's 22 convenient on a case-by-case basis, are things the 23 State can do to make -- encourage investments and 24 make -- and allow investment decisions to happen 25 more quickly. 1 And we have a number of these already 2 drafted, and be happy to share with you -- 3 SENATOR RITCHIE: That's great. 4 KENNETH J. POKALSKY: -- and share with the 5 administration. 6 SENATOR RITCHIE: Thank you. 7 KENNETH J. POKALSKY: You bet. 8 SENATOR MAZIARZ: Senator O'Mara? 9 SENATOR O'MARA: No questions. 10 Thank you. 11 SENATOR MAZIARZ: Assemblywoman Corwin? 12 ASSEMBLYWOMAN CORWIN: Just real quick, Ken. 13 As far as energy costs to your members, how 14 much of a priority is that for them? 15 Do you consider that one of the top 16 priorities, or -- 17 THOMAS RUMSEY: It always -- it is always one 18 of the top two or three. And we see it, no matter 19 where the company is located or what business they 20 are in. 21 We've seen a little bit of price easing on 22 electricity driven by natural gas prices, offset by 23 the rise in fuel. 24 So any of our business who has, you know, 25 transportation as a key concern to them, they're hit 1 at the other end. 2 But every survey we've ever done since I've 3 been at The Business Council, energy costs have been 4 in the top three. 5 ASSEMBLYWOMAN CORWIN: All right. And would 6 you say that's a deterrent for businesses coming 7 into New York State? Is that your -- 8 KENNETH J. POKALSKY: It is, particularly 9 where you -- if you look at where some of our, if -- 10 and say, in the manufacturing arena, who are 11 competing with both in the U.S., some of the 12 southern states who have had historically low-cost 13 electric power, they -- they're not subject to some 14 of the environmental rules imposed both by Congress 15 and by the State, that we are in generation. And, 16 with overseas nations, who -- you know, whose 17 attention to environmental controls are minimal. 18 So, yeah, it's -- if you look at where people 19 can make investments in new business, there's 20 certainly many low-cost energy places. And for an 21 energy-intensive business, those factors can be 22 significant. 23 ASSEMBLYWOMAN CORWIN: Thank you. 24 KENNETH J. POKALSKY: You bet. 25 SENATOR MAZIARZ: Thank you very much, Ken. 1 Darren, we appreciate it. 2 Our last testimony of this hearing is going 3 to be offered by Phil Wilcox, from the International 4 Brotherhood of Electrical Workers Local 97, and 5 Mike Lutz from the IBEW Local 966. 6 MICHAEL LUTZ: Senators, Assemblywoman. 7 First, I would like to thank Senator Maziarz 8 and the Committee. Without your leadership, not 9 only this matter, but many local issues would be 10 forgotten, I believe, west of the 81 corridor. 11 I'd also like to thank our local 12 representatives, Supervisor Engert, and 13 Legislator Syracuse for their efforts in all of this 14 locally. 15 My name is Michael Lutz. I sit in a unique 16 position. 17 I am president/business manager of Local 966, 18 IBEW. I proudly represent the union workforce at 19 Somerset Station; 20 I also represent the New York State Electric 21 and Gas Workers in Lancaster, Lockport, Hamburg, 22 East Aurora, and the Gowanda areas; 23 I am Secretary of the New York State Utility 24 Labor Council, which has a membership of 25 approximately 15,000 in New York State; 1 And, I hold the same position in the 2 IBEW 3rd District Utility Workshop. That 3 organization covers all of New York, Pennsylvania, 4 Delaware, and New Jersey; 5 My last duty is Secretary/Treasurer of 6 System Council U-7, which represents all the NYSEG 7 workers in New York State, covering an area from 8 around Albany, to Plattsburgh, Binghamton, Geneva, 9 Elmira, and as I have mentioned, all the local 10 locations. 11 As you can see, this issue affects the entire 12 utility workforce, not only the people I represent, 13 but all of New York State. 14 I have sat in discussions about these very 15 issues for well over 10 years. Though they vary by 16 state, they are familiar to all of us in the utility 17 industry. 18 If I or my fellow friend, and speaker, 19 Mr. Wilcox, sound redundant, it is because we have 20 tried to address these issues with anybody that 21 would listen. 22 I know that you have heard from us many, many 23 times, so I will be as brief as possible in 24 addressing our concerns, and the direction I believe 25 should be taken by New York State. 1 I will begin with the generation issues. 2 In New York State, you are sitting 3 approximately 5 miles away from what the industry 4 would consider the cleanest coal-burning plant east 5 of the Mississippi. It is reliable, efficient, and 6 has the best workforce operating the facility. 7 It contributes to the local community and to 8 Niagara County in a way that no other industry 9 compares. It provides jobs, tax payments, and 10 ancillary income for many small business entities in 11 Western New York. 12 It is the largest coal-fired power plant in 13 New York State. It can generate up to 675 to 14 680 megawatts of power. It contributes 80 percent 15 of the town of Somerset tax base, 70 percent to the 16 school tax base, and 5 percent to Niagara County's 17 tax base. 18 Its sister plant on Cayuga Lake, though 19 smaller, contributes a substantial portion to the 20 local economy also. 21 Also in Western New York, we have the Huntley 22 and Dunkirk facilities. 23 Mr. Wilcox can speak to their contributions 24 for their local economies where they reside, and to 25 their obligations supporting the tax bases that they 1 operate in. 2 In addressing the generation side of this 3 discussion, it hinges on New York State energy 4 diversity. It cannot be dependent on one source of 5 energy, and I believe that generation diversity is 6 the solution to the problems we face in this state. 7 It must be a multifaceted approach that 8 includes solar, wind, hydro, coal, biomass, oil, 9 nuclear, and gas. 10 For anyone that believes that we can be 11 dependent on one or two sources has not lived 12 through the petroleum shortages in the mid-'70s, the 13 natural gas bubble in the '90s, and/or a cloudy or a 14 still day. 15 Nationally, federal regulations will 16 eliminate over 30,000 to 50,000 megawatts of 17 generation, which equals approximately 18 74 "Somersets" from the equation, making these 19 plants even more necessary for this diversity. 20 The Somerset plant sits in a unique position: 21 Clean, efficient, able to diversify fuels to include 22 biomass, a professional workforce, and a facility 23 that contributes substantially to the local economy 24 and tax base. 25 But, therein lies the second issue that I 1 will address: Transmission of that power throughout 2 New York State. 3 The problems of electric transmission have 4 been known in this state for decades. We hear it 5 all the time, that there is an "aging infrastructure 6 in this country". 7 Our utility industry -- in our utility 8 industry, we have known it all too well for years. 9 Though we have been told that the economy has 10 been in decline, look at the developments that have 11 sprouted up, even in the Western New York area. 12 In Upstate New York, it has been slower, but 13 there has been an increase in demand for electric 14 load. 15 But downstate, comparatively to 16 Western New York, it has been exponential. 17 It would seem that in this day and age, 18 systems would have advanced to meet the needs. 19 They haven't. 20 The aging electrical transmission system in 21 New York State has been known for years, but the 22 uncertainty of regulation in the past has led to 23 investor-owned utilities sitting and waiting to see 24 what state and the federal government would do about 25 it. 1 Knowing this, ex-government officials decided 2 that they would invest or recruit investors, take 3 advantage of the inaction, and go outside of the 4 country and try to run, quote, an extension cord 5 from Québec to New York City. 6 This action would not cure any of the vitally 7 important transmission issues in New York State, 8 benefit any of the local economies that they are 9 proposing putting in this line -- putting this line 10 through, and running this "extension cord" in some 11 of the most pristine waterways in New York State, 12 which would only be a detriment. 13 The job impact would be minimal, and this 14 direct-current line would have little, if any, 15 effect of this -- except for this power going 16 directly to New York City, and all monies going 17 directly to the investors and to another country. 18 If any of us in this room do not realize that 19 this scenario -- what this scenario sounds like, 20 then we are all living in a shell. 21 There is a better solution. 22 Governor Cuomo has put out an RFI for an 23 Energy Highway Initiative. It has generated many 24 specific transmission projects, and specific choke 25 points that can be addressed in the near future. 1 It has brought together some strange 2 bedfellows. All of the major investor-owned 3 utilities have grouped together to form an 4 organization, Transco, to address these issues. 5 Now that they know that the monies can be 6 directed to specific projects that will bolster 7 their systems and strengthen the transmission system 8 throughout the state, they are actively planning for 9 construction and upgrades. 10 These transmission problems or line 11 constraints that exist contribute to Somerset's 12 problem of not being able to move its power to where 13 it is needed in the state. 14 All of this is projected to create thousands 15 of jobs in New York State. It will employee 16 New York State workers, enhance New York State 17 businesses, and produce an estimated $7 billion for 18 local New York State economies. 19 There are many proposals out there, but this 20 seems to be one of the most effective in addressing 21 the immediate needs of the problems I have 22 mentioned. 23 And I believe I speak for the organizations 24 that I represent. These problems, when solved, will 25 be with a highly trained professional workforce, 1 that includes apprenticeships, and a highly skilled 2 workforce, that I am proud to represent. 3 To me, it comes down to doing the right 4 thing. 5 Do we keep and enhance the jobs, people, 6 economies, businesses, localities, and the way of 7 life that we enjoy in New York? 8 Or, do we just pass it through, run the cord 9 to another country, and become dependent on them for 10 energy needs, giving monies away out-of-state and 11 -country, and wait to see more people leave, plants 12 and businesses close, and watch local and state 13 economies and taxpayers take it on the chin again, 14 and then do we just say, "Boy, we should have done 15 something"? 16 Now is the time to act, and with your help, 17 Senator, and this Committee, I trust we will do the 18 right thing, and act now. 19 Thank you for the opportunity to speak, and 20 the time it took. 21 SENATOR MAZIARZ: Thank you very much, Mike. 22 Phil, do you want to add something? 23 PHIL WILCOX: Sure. 24 Good afternoon. 25 My name is Phil Wilcox. I'm a business rep 1 for IBEW Local 97. 2 We represent National Grid and host of 3 power-generation companies in New York State, and 4 Oswego area, and certainly Western New York at the 5 NRG plants. 6 Special thanks to Senator Maziarz and the 7 entire Senate Energy Committee for their attention 8 to these enormously important New York State energy 9 issues. 10 Not since the days of Robert Moses has there 11 been so much at stake for the New York State energy 12 economy. 13 The balance of what I have here only 14 reiterates things that have already been said this 15 morning, so I guess I can go right to the concluding 16 statements, and then make a few comments. 17 The core of the New York State energy economy 18 is threatened at the prospect of becoming dependent 19 on imports. 20 Conversely, with the major investment into 21 our New York State transmission system, we'll 22 realize thousands of jobs, preserve energy 23 independence, protect fuel diversity, stimulate 24 renewable-energy development, and can become a 25 national model for energy policy. 1 Just to refute a couple of comments made this 2 morning: 3 The New York State AFL-CIO is 100 percent 4 behind the New York Transco proposal; 100 percent 5 opposed to TDI. 6 The International IBEW, both construction and 7 utility, 100 percent behind New York Transco; 8 totally opposed to TDI. 9 The Sierra Club, 100 percent behind New York 10 Transco; totally opposed to TDI. 11 And with that, you know, we'll take a couple 12 of questions. 13 SENATOR MAZIARZ: Thank you very much, Phil. 14 And I did want to point out, I was going to 15 point out, after you spoke, about, we did receive a 16 letter this morning, actually, from the AFL-CIO, 17 expressing that very viewpoint; that they were very 18 much in support of the Energy Highway Initiative, 19 and very much opposed to the Champlain-Hudson 20 Express line. 21 You know, the unfortunate part of going last 22 in a hearing, is that everything's been said, and 23 asked, and answered, numerous times over. 24 So, I'm not sure if anyone has any questions 25 or comments that they would like to make. 1 Senator Ritchie? 2 SENATOR RITCHIE: Well, just, Phil, could you 3 clarify, I keep hearing both sides of the issues: 4 From the labor groups, on one side, saying that 5 there's going to be job losses. And then a 6 gentleman today saying, jobs are going to be 7 created. 8 Can you just give me your opinion, and 9 elaborate on what the issue is going to be? 10 PHIL WILCOX: Couple of things we've heard 11 from our consultants. 12 The Champlain line will create a conduit to 13 suck over a billion dollars a year out of the 14 New York State energy economy. That's going to 15 change the cost-benefit analysis necessary for our 16 own transmission upgrades. 17 You've heard the numbers from Transco, a 18 total of 46,000, I believe, in direct and indirect 19 jobs, plus renewable-energy jobs. 20 We were approached by Blackstone for our 21 endorsement. They promised 300 jobs in the New York 22 City area for the interconnect. 23 There's no comparison. 24 You know, they're saying in the trades that 25 some of them will build their own gallows if it's 1 the only work they can get. 2 And there's no clear example of building our 3 own gallows, and running an extension cord to 4 Canada. 5 So there's no comparison to the job numbers, 6 from our perspective. 7 SENATOR RITCHIE: Thank you. 8 SENATOR MAZIARZ: Senator O'Mara? 9 SENATOR O'MARA: No. 10 Thank you. 11 SENATOR MAZIARZ: Assemblywoman Corwin? 12 ASSEMBLYWOMAN CORWIN: If I could just 13 comment. 14 Like I said, I visited the Somerset plant 15 recently. Top-notch operation there. It really is. 16 You know, congratulations to all of the 17 people in your organization who are working there, 18 because it's really a very impressive site. 19 PHIL WILCOX: Thank you. 20 ASSEMBLYWOMAN CORWIN: So, kudos to you. 21 SENATOR MAZIARZ: Well, again, I would 22 certainly associate myself with the Assemblywoman's 23 comments. I've been out to the plant numerous 24 times -- 25 PHIL WILCOX: Yes, you have. 1 SENATOR MAZIARZ: -- in the last many years, 2 and you run a great operation out there, and we want 3 to see it continue here. 4 I would just like to thank all of those who 5 testified, all of those who attended. 6 You know, for us, it's a little unusual to 7 see so many Albany faces here in Barker. 8 We appreciate you coming. 9 I thought it was important that we have this 10 hearing. 11 And I thank my colleagues, Senator Ritchie, 12 Senator O'Mara, and Assemblywoman Corwin, I thank 13 them for attending here today. 14 I thought it was important that we have this 15 here in the town of Somerset, in Barker, in a 16 community in Upstate New York that is so heavily 17 impacted by the future energy decisions. 18 I, lastly, again want to express my 19 appreciation to Supervisor Engert, and to the staff 20 here of the Committee, and of the Senate, for making 21 this hearing so pleasant. 22 And thank everyone for coming, again. 23 And, with that, if none of other members have 24 any comments or questions, I would declare this 25 hearing closed. 1 Thank you. 2 (Whereupon, at approximately 2:25 p.m., 3 the public hearing held before the New York State 4 Senate Standing Committee on Energy and 5 Communications, concluded.) 6 7 ---oOo--- 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25