Electricity Outlook 2002: A Call To Action

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1. Renewed Growth in Demand
By 2003, it is expected that New York City’s economy will follow the national economy into recovery from the present recession, so that electricity demand will once again increase. By the summer of 2003, we expect that peak load demand will reach 10,900 MW, and rise to a level of almost 11,400 MW by 2006 (see Chart). To match this increase in demand, New York City needs approximately 600 MW of new generation to meet the in-city installed capacity requirement of 80 percent.

This forecast rate of growth would be slightly below the average gain of 170 MW per year experienced between 1995 and 2000, a period when the City was experiencing very strong growth in its economy and in population, which grew by 685,700 or 9.4 percent over the 1990 Census.

2. Need to Replace Aging Power Plants
Part of the need for new electric generating facilities stems from the necessity to replace aging plants with newer, more efficient generation. Older units had to be restored to meet the 2001 demand, resulting in over 700 MW of generation that will be over 45 years old in 2002. Unless new electric generation is constructed to replace some of these aging units, the amount of generation that is over 45 years old will double in two years and continue to grow to almost 1,800 MW by 2006.

Therefore, between 700-1,800 MW of new plant is vitally needed during these next five years to replace some of this aging capacity. New, clean-burning natural gas-fired plants using efficient technology will also bring significant environmental benefits.

3. Need to Assure Market Stability
We estimate that at least 800-1,000 MW of additional capacity above what is required to meet the growth in demand and to replace aging plants is needed in the next five years to assure market stability and avoid wide swings in the price of electricity in the newly deregulated power generation market.

Basic Deficit in New Supply
Some progress has been made over the past year in achieving approvals
for new plants, with three new City-based generating projects approved by the New York State Siting Board under the Article X permit process. However, no new supply is scheduled to come on line during 2002, nor are any new generating facilities presently under construction in New York City. Importing of power is constrained, as transmission capacity into the City is limited to approximately 5,000 MW.

• The earliest expected commercial operation for the first two of these
  projects, Ravenswood and East River Repowering, with a combined
  total of 538 MW, was the summer of 2003. However, Ravenswood
  has recently announced a delay to 2004 due to delays in obtaining
  construction permits. Furthermore, the East River Repowering
  Project has also been delayed to 2004.

A decision on a fourth project, the proposed Poletti plant that would provide 500 MW of power, is expected by the end of April 2002. The construction phase is expected to take at least two years, and consequently, this capacity would not be available until midsummer of 2004 at the earliest.

In addition to these projects, thirteen other new generating facilities have been proposed and are in varying stages of the approval process. All of these projects have the potential for adding approximately 7,500 MW of capacity for the New York City area (see Map). Several projects have target dates of 2003 and 2004, but in reality, unless early approval is received and the market for the proposed plants is once again favorable, few of these projects can be expected to be in service prior to the summer of 2005, or even 2006.

One consequence of the failure of the Enron Corporation and the decreasing willingness of the financial community to underwrite proposed projects is that a number of proposed power plant projects in the US are being delayed or postponed. This has already begun affecting proposed New York City projects, including those that have successfully passed through the approval process.

• Reliant Resources (formerly Orion Power) Astoria Generating Facility
  stated that the collapse of Enron has made it difficult for energy
  companies such as Reliant to secure financing, delaying the project’s completion until as late as 2007. However, Reliant stated it is still committed to the repowering project.
  

We believe that not all projects that are approved will be built, which exacerbates our concerns over the City’s required needs by 2006.