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Today's IssueAlert Sponsors:=20
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Rapidpartsmart increases= =20 supply options, reduces outage risks and cuts inventory investment. Contac= t=20 John Kelly at (727) 669-3006 for more information or go to=20 www.rapidpartsmart.com [IMAGE] The most comprehensive, up-to-date map of the North American Power System b= y=20 RDI/FT Energy is now available from SCIENTECH. =20 [IMAGE] IssueAlert for March 22, 2001=20 New York Obstacles Thwart Sithe Energies' Plans for New Power Plant=20 by Will McNamara=20 Director, Electric Industry Analysis [News item from PR Newswire] Sithe Energies, Inc. announced that, in respon= se=20 to issues raised by local residents, the company is reassessing its plans f= or=20 a power generating facility in Ramapo, New York. The alternative currently= =20 under review is a smaller "peaking" facility, which would use no water for= =20 generation and operate only during a time of peak electricity use and=20 emergencies to help ensure reliability of the region's electricity supply.= =20 Originally slated as an 827-MW combined cycle facility fueled by natural ga= s,=20 the alternative plant is a 510-MW peaking unit also powered by natural gas.= =20 Analysis: Sithe Energies' original plans for the Ramapo plant appear to hav= e=20 been thwarted by concerns among local residents who opposed certain aspects= =20 of the plant. Ramapo is located 30 miles north of New York City. Chief amon= g=20 the concerns of local residents is that Ramapo plant was originally planned= =20 to run all the time to meet demand, and as a result would use local water= =20 resources for cooling purposes. In response to the concerns of residents,= =20 Sithe is modifying plans for the plant and reducing its planned output.=20 Unfortunately, Sithe plans to move forward with a smaller peaking unit at t= he=20 very time when it has become increasingly clear that the state of New York= =20 has some rather serious power supply concerns. =20 For background, it is important to note that Exelon Corp. owns nearly half = of=20 Sithe Energies. In December 2000, Exelon acquired 49.9 percent of the stock= =20 of Sithe. The remaining 50.1 percent of Sithe is owned by Vivendi (34=20 percent), Marubeni Corp. (15 percent) and Sithe Management (1 percent). The= =20 acquisition marked the continuation of an aggressive generation expansion= =20 plan on the part of Exelon.=20 Jim McGowan, Sithe senior vice president for development, referenced the ro= le=20 that public opposition played when he spoke about the new plans for a peaki= ng=20 unit in the area. "Sithe has a strong history of working closely with local= =20 communities and inviting their input to ensure their major issues are=20 addressed," McGowan said. "We've listened carefully to [residents'] concern= s=20 and are addressing them by considering a facility that is clean, less=20 visible, and uses no water for generation." McGowan further noted that the= =20 new peaking plant will only operate a limited number of hours annually whil= e=20 fulfilling the region's growing need for electricity during times of peak= =20 consumer demand.=20 As an independent power producer, Sithe Energies owns power plants across t= he=20 United States and internationally. The company has a generation presence in= =20 such states as California, Colorado, Massachusetts, New Jersey and=20 Pennsylvania (among several others). In New York, Sithe Energies owns four= =20 rather small plants and one large plant that generate approximately 1,329 M= W:=20 Batavia (58 MW), Independence Station (Scriba, N.Y., 1,042 MW), Massena (86= =20 MW), Ogdensburg (83 MW), and Sterling (Sherill, N.Y., 60 MW). In addition t= o=20 the proposed peaking plant in Ramapo, Sithe Energies also has proposed=20 Heritage Station, an 800 MW power plant located near Lake Ontario. A full= =20 siting review in New York normally takes a year to complete. However,=20 projects under 80 MW are not required to go through the extensive=20 environmental impact statement, which generally involves a detailed=01*and = time=20 consuming=01*examination of alternatives. =20 The state of New York has not brought a new plant online since 1996, when a= =20 200-MW plant opened in Brooklyn. It has been almost seven years since a 1,0= 00=20 MW unit in Oswego, N.Y., marked the last plant to open upstate. Further, Ne= w=20 York expects only a 3.5-percent increase in new capacity in the next three = to=20 four years. Consequently, concerns about the state's ability to meet=20 increasing demand for power have gained momentum, heightened by the ongoing= =20 problems in California. Pressure has been placed on New York regulators to= =20 expedite the approval steps for siting new plants in the state. However, at= =20 the same time, environmental groups closely guard the proposals for new=20 plants and often lobby for limitations on how and where the new plant will= =20 produce power. This appears to be the case in Sithe Energies' Ramapo plant,= =20 which is proceeding on the condition that it will not use water resources t= o=20 generate power.=20 While other new plants are being planned in New York, realistically it will= =20 be two years or more before they come online and provide sufficient capacit= y=20 to ease concerns about shortages. Meanwhile, the state enters this summer's= =20 season with significant doubts about its ability to meet power demands. "Ne= w=20 York City, like other areas of the Northeast, the Midwest and California, i= s=20 in a very serious situation," reported a member of the New York Public=20 Service Commission to the New Assembly. =20 While the entire state of New York is subject to shortages, the problem=20 appears to be particularly acute in New York City. A November 2000 FERC=20 report entitled "Investigation of Bulk Power Markets, Northeast Region,"=20 highlights specific capacity problems in the New York City/Long Island=20 community of 11 million people. These areas are particularly vulnerable=20 because they are isolated from most of the state's grid, the study says. Li= ke=20 northern California, which suffered rolling blackouts due to transmission= =20 constraints, New York City and Long Island can only import limited quantiti= es=20 of power on constrained transmission lines. Hydro and fossil resources are= =20 plentiful in upstate New York, but cannot reach the city. Being both densel= y=20 populated and heavily residential, it is difficult to site new power plants= =20 in the area. Consequently, 80 percent of the power that the city consumes i= s=20 generated by the city. New plants are being proposed because New York City= =20 reportedly will be 300 MW short of its required 8,428-MW generating capacit= y=20 needs this summer. That projected shortfall is expected to increase by=20 another 200 MW by summer 2002. =20 Increased demand is causing additional problems for the energy markets of N= ew=20 York City and New York State. Demand in the state rose by 2,700 MW from 199= 5=20 to 2000, or 2.5 times as fast as new generation capacity was added. This=20 year's demand is expected to reach 31,100 MW, or about 3.7 percent above=20 regulators' earlier forecasts. According to the FERC report, New York City'= s=20 load should reach 10,535 MW this summer alone, requiring 8,428 MW of in-cit= y=20 capacity, along with imports, to meet demand and provide a reserve margin.= =20 With a current capacity of 8,132 MW, there is a potential 296 MW shortfall.= =20 Long Island has a potential 131 MW shortfall to meet the required 4,653 MW = of=20 power. =20 The report confirms earlier projections by FERC Chairman Curt HSbert and=20 others that unless New York gets additional generation capacity online with= in=20 the next few months, the state could suffer some of California's problems.= =20 However, despite the need for additional power generation in the state, the= =20 intense public scrutiny of Sithe's plant in Ramapo echoes similar protests= =20 from environmental groups and politicians for new generation plants=20 throughout the state. For instance, the New York Power Authority's (NYPA)= =20 plan to install ten 44-MW combustion turbines by June was met with oppositi= on=20 from environmental groups like the New York Public Interest Research Group= =20 (NYIRG), which has sued the NYPA, charging that it circumvented the=20 environmental review process for siting new plants. In addition, FERC's=20 report included data from the New York ISO indicating that there were=20 approximately 74 projects proposed to be built in New York State (as of=20 November 2000). The report indicated that only one of these projects is=20 likely to be built in the next three to four years.=20 Although Sithe has modified its plans into a smaller peaking unit, McGowan= =20 has reiterated that New York should not fall behind in meeting its energy= =20 requirements. If it does, it will make the same mistakes for which Californ= ia=20 is now paying a tremendous price. Along the same lines, William Muesler, CE= O=20 of the New York ISO, recently said that to avoid a replication of=20 California's market meltdown, New York must move quickly to build more powe= r=20 plants. Muesler cited that 8,600 MW of new power plant capacity, 25 percent= =20 more than is currently available, must be constructed in New York by 2005 o= r=20 shortages will become likely, pushing up prices and increasing the odds of= =20 rolling blackouts. =20 However, despite these clear warnings about the need for new power plants,= =20 "not in my back yard" has been a common response in New York. Even New=20 Jersey's acting Governor Donald T. DiFrancesco has joined the ranks of thos= e=20 opposing new power plants in the region. DiFrancesco reportedly told a=20 meeting of about a dozen North Jersey mayors who oppose new power plants th= at=20 he has created a task force to help opponents of various power plant projec= ts=20 in New York and New Jersey. Included in the task force are members of=20 DiFrancesco's own staff, the state Department of Environmental Protection a= nd=20 the Attorney General's Office. Moreover, although California offers a clear= =20 picture of the ramifications that can result from not establishing adequate= =20 supply, New York appears to be heading down a similar path. Although=20 California and New York have different restructuring models, one market=20 factor is the same in both states: supply that cannot meet demand. We know= =20 the toll that this inequity has had on California. Is it only a matter of= =20 time before New York suffers the same consequences?=20 An archive list of previous IssueAlerts is available at www.ConsultRCI.com Reach thousands of utility analysts and decision makers every day. Your=20 company can schedule a sponsorship of IssueAlert by contacting Nancy Spring= =20 via e-mail or calling (505)244-7613. Advertising opportunities are also=20 available on our website.=20 SCIENTECH is pleased to provide you with your free, daily IssueAlert. Let = us=20 know if we can help you with in-depth analyses or any other SCIENTECH=20 information products. If you would like to refer a colleague to receive ou= r=20 free, daily IssueAlerts, please reply to this email and include their ful= l=20 name and email address or register directly on our site. =20 If you no longer wish to receive this daily email, send a message to=20 IssueAlert, and include the word "delete" in the subject line.=20 SCIENTECH's IssueAlerts(SM) are compiled based on the independent analysis= =20 of SCIENTECH consultants. The opinions expressed in SCIENTECH's IssueAlert= s=20 are not intended to predict financial performance of companies discussed, = or=20 to be the basis for investment decisions of any kind. SCIENTECH's sole=20 purpose in publishing its IssueAlerts is to offer an independent perspecti= ve=20 regarding the key events occurring in the energy industry, based on its=20 long-standing reputation as an expert on energy issues. =20 Copyright 2001. SCIENTECH, Inc. All rights reserved.
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