NYSEG Publishes Report on New York's Evolving Electric Energy Crisis

Company Challenges Assumptions in NYISO Report



NYSEG Believes Infrastructure Not in Place to Create

Wholesale Electric Market Until 2008



Apr 04, 2001, 01:00 ET from New York State Electric & Gas Corporation

    BINGHAMTON, N.Y., April 4 /PRNewswire/ -- New York State Electric & Gas
 Corporation (NYSEG), a subsidiary of Energy East Corporation (NYSE:   EAS),
 today published a report on New York's energy crisis entitled, New York
 State's Electric Energy Crisis and NYSEG's Comprehensive Solution.  In its
 report, NYSEG warns that the New York electric energy market, like a train
 without brakes, is on a volatile, high-priced track leading toward derailment.
 Since the inception of New York Independent System Operator (NYISO) operations
 in November 1999, wholesale electric prices in New York have risen over 100%.
 Because there is insufficient supply in the state, consumers with electric
 market price pass-throughs on their bills are almost assured of future
 increasing total electric prices.
     The urgency for real solutions to New York's electric energy crisis was
 reaffirmed recently on March 14, 2001 when the NYISO issued a report entitled
 Power Alert: New York's Energy Crossroads (NYISO Report).  However, as
 detailed in New York State's Electric Energy Crisis and NYSEG's Comprehensive
 Solution, NYSEG demonstrates that there are serious problems with generation
 supply and a lack of transmission and pipeline infrastructure, which prevent
 the emergence of a robust wholesale electric market until 2008.  Consumers
 expect and deserve price certainty during this period.  NYSEG's report also
 demonstrates that the NYISO assumptions understate the potential crisis --
 both in terms of wholesale and total electric price increases as well as
 system reliability.
 
     The NYISO Report:
     *     Is premised on outdated prices for gas and does not consider any
           natural gas pipeline transportation or delivery costs.
     *     Unrealistically assumes that 8,600 megawatts of new generation,
           roughly 30 percent of New York's peak demand, can be built by 2005.
     *     Includes recommendations to subject New York customers to unstable
           and volatile electric wholesale market prices, so called "price
           signals," at a time when a robust wholesale electric market is years
           away.
     *     Falls short in assessing the magnitude of the crisis and fails to
           describe a realistic solution to protect New York electricity
           customers from irrationally volatile wholesale electric energy price
           spikes.
 
     Ralph Tedesco, president of NYSEG, said: "NYSEG believes that energy
 policies must adjust to evolving market dynamics.  In the 1990s, escalating
 energy prices, largely due to high state and local taxes and runaway NUG
 costs, were the rule in New York State.  In an effort to reduce electric
 prices and increase choice, the policy for a competitive wholesale electric
 energy marketplace was put in place.  Wholesale and retail competition, it was
 thought, would drive electric prices down to more reasonable levels and
 provide a catalyst for further market innovation.  Yet, today, rising total
 electric prices in parts of New York threaten our economy.  While NYSEG
 strongly supports competition, our experience in New York, coupled with the
 California experience, underscores the need for us to reevaluate the time
 frame and infrastructure requirements necessary to achieve our goals.
     "Without delay, New York State must act to provide real solutions to the
 state's looming energy crisis.  The NYISO's recommendations cannot be
 implemented in time to protect consumers and the upstate economy from the
 irrational price volatility that is impacting other areas of New York and the
 country.  The problems facing the wholesale electric energy market will
 require at least seven years to be resolved, even if we act now.  Price
 protection for consumers, in the interim, is imperative.  Our recently
 proposed NYSEGPlan, which includes a price protection plan to freeze electric
 prices through mid-2008, contains the real solutions to ensure a successful
 transition to a robust competitive electric energy market," Tedesco concluded.
     On March 7, 2001, NYSEG announced a comprehensive six-point energy policy
 named NYSEGPlan.  By providing reliable energy at stable prices, while also
 promoting competition by offering customers their choice of suppliers,
 NYSEGPlan assures that the people and businesses of upstate New York
 ultimately receive the benefits intended by deregulation of the electric
 industry with appropriate environmental sensitivities.  The NYSEGPlan
 recommendations include:
 
     *     Streamline the siting and approval process to build new generating
           plants.  To achieve this, NYSEG recommends establishing a siting
           process, which is mindful of the environment and provides a decision
           within six months.
     *     Add to the state's transmission capacity.  To achieve this, NYSEG
           recommends financial incentives be introduced to encourage the
           construction of new transmission and expansion of existing
           transmission and establishing an expedited licensing process.
     *     Add to the state's natural gas supply infrastructure.  To achieve
           this, NYSEG recommends establishing an approval process that
           includes financial incentives to expeditiously add the needed new
           capacity.
     *     Create a regional transmission organization to increase supply
           liquidity.  To achieve this, NYSEG recommends that a technical
           conference be convened that would include ISO representatives from
           New England, New York, and the Pennsylvania-New Jersey-Maryland ISO
           (PJM) and which would mandate a time frame to institute a Regional
           ISO.
     *     Reinforce the need for wise energy use by all consumers.  But more
           is needed than sending "price signals" which the upstate New York
           economy cannot afford.  Price signals that arrive in customers'
           bills 45 days after the fact do not work.  We need to encourage
           interruptible load where feasible, and build the technological
           infrastructure necessary for real time pricing.
     *     Approve the NYSEG Price Protection Plan on a timely basis to ensure
           that customers have reliable energy at stable prices, while also
           giving customers a choice of suppliers during the transition to a
           well-functioning competitive market.  To achieve this, NYSEG
           recommends that the NYSEG Price Protection Plan be approved by
           July 1, 2001.
 
     Press Conference Information: To review its report published today, NYSEG
 will host a press conference this afternoon at 1:30 p.m. EST in Albany, New
 York, at the Legislative Correspondents' Press Room, Legislative Office
 Building, Room 130.  Copies of the report and additional information will be
 available at the press conference.
 
     About NYSEG: NYSEG is a subsidiary of Energy East Corporation, a
 super-regional energy services and delivery company in the Northeast. NYSEG
 provides superior customer service and promotes competition. By focusing on
 customer service, competition and growth, NYSEG will continue to be a valuable
 asset to the communities it serves. For more information about NYSEG, visit
 the company's Web site at http://www.nyseg.com.
     About Energy East: Energy East is a super-regional energy services and
 delivery company in the Northeast. A leader in promoting competition, Energy
 East serves 2 million customers (1.4 million electricity and 600,000 natural
 gas) in upstate New York and New England over a 32,000-square-mile service
 area. The strength of the company is underscored by its commitment to
 financial discipline, state of the art technology and the operational talent
 to be among the best at what it does. On February 20, 2001, Energy East
 announced a strategic combination with RGS Energy Group, the parent company of
 Rochester Gas and Electric Corporation. The combined company will be one of
 the largest, most diversified energy providers in the Northeast, serving half
 of upstate New York and nearly 3 million customers, including approximately
 1.8 million electric customers, almost one million natural gas customers and
 approximately 200,000 other retail energy customers. For more information
 about Energy East, please visit the company's Web site at
 http://www.energyeast.com.
 
 

SOURCE New York State Electric & Gas Corporation
    BINGHAMTON, N.Y., April 4 /PRNewswire/ -- New York State Electric & Gas
 Corporation (NYSEG), a subsidiary of Energy East Corporation (NYSE:   EAS),
 today published a report on New York's energy crisis entitled, New York
 State's Electric Energy Crisis and NYSEG's Comprehensive Solution.  In its
 report, NYSEG warns that the New York electric energy market, like a train
 without brakes, is on a volatile, high-priced track leading toward derailment.
 Since the inception of New York Independent System Operator (NYISO) operations
 in November 1999, wholesale electric prices in New York have risen over 100%.
 Because there is insufficient supply in the state, consumers with electric
 market price pass-throughs on their bills are almost assured of future
 increasing total electric prices.
     The urgency for real solutions to New York's electric energy crisis was
 reaffirmed recently on March 14, 2001 when the NYISO issued a report entitled
 Power Alert: New York's Energy Crossroads (NYISO Report).  However, as
 detailed in New York State's Electric Energy Crisis and NYSEG's Comprehensive
 Solution, NYSEG demonstrates that there are serious problems with generation
 supply and a lack of transmission and pipeline infrastructure, which prevent
 the emergence of a robust wholesale electric market until 2008.  Consumers
 expect and deserve price certainty during this period.  NYSEG's report also
 demonstrates that the NYISO assumptions understate the potential crisis --
 both in terms of wholesale and total electric price increases as well as
 system reliability.
 
     The NYISO Report:
     *     Is premised on outdated prices for gas and does not consider any
           natural gas pipeline transportation or delivery costs.
     *     Unrealistically assumes that 8,600 megawatts of new generation,
           roughly 30 percent of New York's peak demand, can be built by 2005.
     *     Includes recommendations to subject New York customers to unstable
           and volatile electric wholesale market prices, so called "price
           signals," at a time when a robust wholesale electric market is years
           away.
     *     Falls short in assessing the magnitude of the crisis and fails to
           describe a realistic solution to protect New York electricity
           customers from irrationally volatile wholesale electric energy price
           spikes.
 
     Ralph Tedesco, president of NYSEG, said: "NYSEG believes that energy
 policies must adjust to evolving market dynamics.  In the 1990s, escalating
 energy prices, largely due to high state and local taxes and runaway NUG
 costs, were the rule in New York State.  In an effort to reduce electric
 prices and increase choice, the policy for a competitive wholesale electric
 energy marketplace was put in place.  Wholesale and retail competition, it was
 thought, would drive electric prices down to more reasonable levels and
 provide a catalyst for further market innovation.  Yet, today, rising total
 electric prices in parts of New York threaten our economy.  While NYSEG
 strongly supports competition, our experience in New York, coupled with the
 California experience, underscores the need for us to reevaluate the time
 frame and infrastructure requirements necessary to achieve our goals.
     "Without delay, New York State must act to provide real solutions to the
 state's looming energy crisis.  The NYISO's recommendations cannot be
 implemented in time to protect consumers and the upstate economy from the
 irrational price volatility that is impacting other areas of New York and the
 country.  The problems facing the wholesale electric energy market will
 require at least seven years to be resolved, even if we act now.  Price
 protection for consumers, in the interim, is imperative.  Our recently
 proposed NYSEGPlan, which includes a price protection plan to freeze electric
 prices through mid-2008, contains the real solutions to ensure a successful
 transition to a robust competitive electric energy market," Tedesco concluded.
     On March 7, 2001, NYSEG announced a comprehensive six-point energy policy
 named NYSEGPlan.  By providing reliable energy at stable prices, while also
 promoting competition by offering customers their choice of suppliers,
 NYSEGPlan assures that the people and businesses of upstate New York
 ultimately receive the benefits intended by deregulation of the electric
 industry with appropriate environmental sensitivities.  The NYSEGPlan
 recommendations include:
 
     *     Streamline the siting and approval process to build new generating
           plants.  To achieve this, NYSEG recommends establishing a siting
           process, which is mindful of the environment and provides a decision
           within six months.
     *     Add to the state's transmission capacity.  To achieve this, NYSEG
           recommends financial incentives be introduced to encourage the
           construction of new transmission and expansion of existing
           transmission and establishing an expedited licensing process.
     *     Add to the state's natural gas supply infrastructure.  To achieve
           this, NYSEG recommends establishing an approval process that
           includes financial incentives to expeditiously add the needed new
           capacity.
     *     Create a regional transmission organization to increase supply
           liquidity.  To achieve this, NYSEG recommends that a technical
           conference be convened that would include ISO representatives from
           New England, New York, and the Pennsylvania-New Jersey-Maryland ISO
           (PJM) and which would mandate a time frame to institute a Regional
           ISO.
     *     Reinforce the need for wise energy use by all consumers.  But more
           is needed than sending "price signals" which the upstate New York
           economy cannot afford.  Price signals that arrive in customers'
           bills 45 days after the fact do not work.  We need to encourage
           interruptible load where feasible, and build the technological
           infrastructure necessary for real time pricing.
     *     Approve the NYSEG Price Protection Plan on a timely basis to ensure
           that customers have reliable energy at stable prices, while also
           giving customers a choice of suppliers during the transition to a
           well-functioning competitive market.  To achieve this, NYSEG
           recommends that the NYSEG Price Protection Plan be approved by
           July 1, 2001.
 
     Press Conference Information: To review its report published today, NYSEG
 will host a press conference this afternoon at 1:30 p.m. EST in Albany, New
 York, at the Legislative Correspondents' Press Room, Legislative Office
 Building, Room 130.  Copies of the report and additional information will be
 available at the press conference.
 
     About NYSEG: NYSEG is a subsidiary of Energy East Corporation, a
 super-regional energy services and delivery company in the Northeast. NYSEG
 provides superior customer service and promotes competition. By focusing on
 customer service, competition and growth, NYSEG will continue to be a valuable
 asset to the communities it serves. For more information about NYSEG, visit
 the company's Web site at http://www.nyseg.com.
     About Energy East: Energy East is a super-regional energy services and
 delivery company in the Northeast. A leader in promoting competition, Energy
 East serves 2 million customers (1.4 million electricity and 600,000 natural
 gas) in upstate New York and New England over a 32,000-square-mile service
 area. The strength of the company is underscored by its commitment to
 financial discipline, state of the art technology and the operational talent
 to be among the best at what it does. On February 20, 2001, Energy East
 announced a strategic combination with RGS Energy Group, the parent company of
 Rochester Gas and Electric Corporation. The combined company will be one of
 the largest, most diversified energy providers in the Northeast, serving half
 of upstate New York and nearly 3 million customers, including approximately
 1.8 million electric customers, almost one million natural gas customers and
 approximately 200,000 other retail energy customers. For more information
 about Energy East, please visit the company's Web site at
 http://www.energyeast.com.
 
 SOURCE  New York State Electric & Gas Corporation