By Kate Thomas
HOUSTON, Mar. 14�To avert "serious electricity shortages," the New York Independent System Operator (ISO) Wednesday called upon the state to "immediately" approve 4,000-5,000 Mw of proposed new electric generating capacity.
"New York is headed toward a very serious situation, unless it acts immediately to get new supply sited within its borders and embarks on substantial customer choice programs," said William J. Museler, CEO of the New York ISO.
To avoid to replication of California's "market melt down," with its attendant price increases and rolling blackouts, New York must attend to its growing supply-demand imbalance, the ISO said. If the state fails to act, New Yorkers can expect a decrease in electric system reliability, higher prices, and increased environmental degradation, it said.
An ISO analysis shows electricity demand has outstripped supply, and the state faces the "probability of blackouts" and a reduction in reliability, although the ISO's timing is unclear. Between 1995 and 2000, while statewide demand for electricity rose by 2,700 Mw, capacity increased by just 1,060 Mw. New York state has not covered its 18% reserve requirement from in-state generation since 1999.
If no new in-state generation comes on line in the next 5 years, in-state reserve margins will shrink to 8.4% in 2005 from the current 14.9% above peak, the ISO projected. Increased reliance on out-of-state generation can subject New York electrical suppliers and customers to "transmission restrictions and political and economic considerations beyond the control or influence of responsible New York state entities," the ISO said.
Much like California, obtaining approval to build new electric generation has been a problem. New streamlined rules were put in place 18 months ago, but only two plants have been approved, both in upstate New York, and neither is under construction, the ISO noted.
The continued growth in demand and a poor supply response will likely cause "some increase in the overall price of electricity" this summer, the ISO predicted. Demand reduction programs are being put in place that will pay participating customers.
While hard to predict, the ISO said, even 200-300 Mw of participation will yield significant benefits on days when supply is tight and system operation is in jeopardy. Some customers need to be exposed to the true price of electricity, the ISO said.
"One of the many lessons learned from the recent California experience is that, in the presence of a capacity shortfall, when retail rates and wholesale prices are disconnected in time and space, the results can be disastrous," it noted.
In order to meet the state reserve capacity requirement, the ISO projected New York state must import 785 Mw this summer, and without new generation in place, imports will rise to 1375 Mw in 2002, 1909 Mw in 2003, 2405 Mw in 2004, and 2852 Mw in 2005. State reliability rules restrict imports to 2,750 Mw.
Without new generation, the ISO predicted prices could be expected to increase 14% by 2005.
The report calls for 2,000-3,000 Mw to be approved for New York City and an additional 1,000 Mw statewide during the next 3-4 years. Current installed capacity in the state amounts to 35,347 Mw. Peak demand last summer was 30,200 Mw, the ISO said.
If the state added 8,600 Mw between now and 2005, the ISO said, prices could be expected to decline 20-25%, resulting in savings of $1.4 billion/year.