Good afternoon Chairman Maziarz and Members of the Senate. Standing Committee on Energy and Telecommunications. We welcome this

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1 Welcome and Introductions Good afternoon Chairman Maziarz and Members of the Senate Standing Committee on Energy and Telecommunications. We welcome this opportunity to address the impact that closing the Indian Point nuclear power plant, due to a natural disaster or for any other reason, would have on the reliability of the bulk electric power system in New York. My name is Stephen G. Whitley. I have served as the President and Chief Executive Officer of the New York Independent System Operator (NYISO) for the last three years. I have over 38 years of experience in power system operations and planning, and in electricity markets. Previous to my position at the New York ISO, I served for seven years as Senior Vice President and Chief Operating Officer of ISO New England (ISO-NE), a regional transmission organization (RTO) serving a six-state area. I have chaired regional power system organizations, including the council representing ten Independent System Operators and Regional Transmission Organizations in North America. I currently serve as the Chair of the Executive Committee of the Eastern Interconnection Planning Collaborative representing 26 Planning Authorities throughout the Eastern Interconnection, which I will discuss later. 1

2 During my 30-year tenure at the Tennessee Valley Authority (TVA), I served as General Manager, Electric System Operations, of the Transmission Power Supply Group, and Vice President, Transmission and was responsible for electric system operations and planning in the seven-state TVA service area. With me today is Rick Gonzales, Senior Vice President and Chief Operating Officer for the NYISO. Mr. Gonzales is responsible for NYISO grid reliability, market operations, and system planning and information technology. Rick is the chief operator and planner for the New York bulk electric power system. He has over 25 years of electric industry experience, primarily in the areas of power control center engineering and energy market operations. He served as NYISO s Vice President of Operations before becoming COO and has been with the NYISO since its inception in Mr. Gonzales joined the staff of the NYISO s predecessor, the New York Power Pool, in He worked for Northeast Utilities at the Connecticut Valley Electric Exchange from 1983 to

3 Background and Functions of NYISO The New York ISO is a federally regulated not-for-profit corporation that began operations in The NYISO carries out three key functions. Our primary mission is to reliably operate New York s bulk electric system, keeping the lights on twenty four hours a day, seven days a week, in accordance with national, regional and local reliability requirements. Second, we administer competitive wholesale electricity markets enabling generators and other resources to sell power to utilities and other parties who supply it directly to New York consumers. Third, the New York ISO conducts reliability and economic planning to ensure that the state s bulk electric system operates reliably in the future. The second and third tasks are strongly coupled to the first keeping the lights on. We plan the system to ensure we have sufficient resources in the future and we use competitive market signals to provide economic incentives for resources to locate in the right locations and to meet the state s electricity needs at the lowest possible cost. Geographically, we serve one of the nation s largest states, with one of the world s largest and most complex load pockets, New York City. We 3

4 operate over 11,000 circuit miles of transmission lines and dispatch more than 300 generating units spread out over the state. But certain areas of the state lack enough transmission to efficiently move power to the downstate areas where most of the load is. This lack of transmission is why we refer to NYC as a load pocket. Our daily electricity demand averages about 20,000 MWs, while peak demands are over 34,000 MWs during the summer months. Meeting peak summer demand requires that electricity generation must come on line instantaneously and reliably to avoid service disruptions. Based on the blackouts in 2003 and 1977, we know that the economic costs of a large outage in our state can total billions of dollars per day. Upgrading and protecting the integrity of our electricity delivery infrastructure is a critical goal that we must not lose sight of if we are to sustain and revitalize our state s economy. We face these challenges together as citizens, private industry, and policy makers. On behalf of the New York ISO, I look forward to assisting the Governor, the Legislature, and the responsible State Agencies in achieving the state s energy, economic, and environmental goals. 4

5 The NYISO is not testifying today about nuclear safety, or about whether a shutdown of Indian Point should or should not occur. Rather, we are here to describe the consequences to the State s power system if Indian Point were to stop operating due to a natural disaster or for any other reason. There are three key points to take away on this topic. First, the immediate shut down of Indian Point without replacement resources could have serious electric reliability consequences during peak load periods, including rolling blackouts. Second, because New York lacks sufficient transmission to supply New York City from upstate resources, additional generation and demand response located in or near New York City would likely be the only viable replacement resources to maintain reliability in the short term. Third, much of New York s transmission is aging, and many facilities will require replacement anyway over the next 20 years. Therefore, we should pursue cost effective upgrades to improve the transmission system and tap our surplus generating resources located in upstate and western New York. Rick Gonzales will testify on NYISO planning studies that have examined the reliability impacts of closing the Indian Point facility. He will discuss the impact on reliability of new resources expected to come on line 5

6 in New York in the short term, and inform you about additional projects that could address reliability needs in the event of an Indian Point shut down. I will then address the importance of transmission planning and the build-out of the power grid in New York, and discuss planning efforts we are undertaking with utilities in New York and our neighboring power systems in eastern United States and Canada. After our testimony we will be glad to answer any questions you may have. I will now yield to Rick Gonzales.. Now back to Steve Whitley.. Transmission Reinforcement One of the toughest periods of my career was between 1985 and 1990, when the NRC ordered TVA to shut down its five operating nuclear reactors for safety reasons. This shutdown removed 6,000 MWs of capacity, about one fifth of the total available for TVA for 5 years. During three of these five years, TVA also experienced drought conditions which severely limited its hydro capacity. This situation presented the worst nightmare for an 6

7 electric system operator the perfect storm. I went into work every day thousands of megawatts short of the capacity needed to run the power grid. How did we get through this period without blackouts at TVA? The solution came from the robust transmission system we had developed to protect reliability. There was surplus capacity in regions around TVA at that time. TVA was able to import power day after day from neighboring systems to help keep the lights on. I tell this story to relate my experience as a grid operator to the potential shutdown of Indian Point. As Rick Gonzales indicated, the short term solutions we would need if Indian Point were shut down will no doubt include the addition of gas-fired generation at or near New York City. Building generation close to New York City loads has sound reliability benefits in New York and elsewhere. We must ensure that there is adequate supply physically located close to the downstate load pockets. However, we should use this opportunity to look at additional solutions, including expanding New York s limited transmission system along existing rights-ofway, and others. By improving the capability of the Leeds-Pleasant Valley and Central-East transmission corridors, we can improve the ability to move 7

8 power from areas in New York that already have significant excess capacity to downstate areas. The upstate and western New York areas of the system also have the greatest potential for the development of renewable resources. I believe such transmission upgrades will also add significant reliability benefits by allowing a more diverse set of generating resources to meet electric needs in the event of a natural gas supply disruption. As a complement to the NYISO s planning processes, the New York Transmission Owners initiated a joint study of the reliability of the state's bulk electric power system to help address future electricity needs and support the growth of renewable energy sources. The New York State Transmission Assessment and Reliability Study, or STARS, is a study evaluating the lifecycle of New York s existing transmission assets and identifying potential economically beneficial transmission projects. Simply stated, New York has an aging transmission infrastructure, with a significant portion of New York s high-voltage transmission lines built several decades ago. The STARS initiative will estimate costs and quantify benefits that may be realized from identifying transmission projects that could upgrade the capacity of facilities that need to be replaced anyway. In other words, 8

9 for an incremental cost, we could get more transmission capacity through existing transmission rights-of-way. Although merchant transmission cables have been added to connect New York to neighboring power systems, the last time New York added transmission capacity to link western and upstate New York to downstate areas was over twenty years ago. The potential STARS transmission projects would increase transfer capabilities by over 1,500 MWs, allowing existing generation and new renewable resources in western and upstate New York to reach loads in the lower Hudson Valley and New York City. Another proposed transmission project could add a 1,000 MW tie to Hydro Quebec allowing us to tap additional hydro power resources in Canada. There are many other advantages to expanding the grid in New York on a cost effective basis that can be identified through the NYISO economic planning processes. In contrast, proponents in the Midwest and Washington are advocating the construction of major transmission lines from the upper Midwest to the East Coast load centers, like New York City. The cost of these facilities could approach $100 billion, all directed at consumers in the East if the proponents of these projects have their way. These projects have 9

10 the stated aim of bringing renewable resources from the Midwest to the Northeast, but they may actually bring in more coal-fired generation as well. I believe that building out transmission in our own state to integrate existing and future in-state renewables will enable us to accomplish the same objective at a much lower cost for New York consumers. And as I have already mentioned, a build-out of our transmission system would also allow existing resources in upstate and western New York to more efficiently move their energy across our state to our larger load centers, improving competition and reliability. I am now leading a national effort called the Eastern Interconnection Planning Collaborative that will identify the costs and characteristics of an electric supply and delivery system to ensure reliable and efficient service for consumers under many different views of the future. As I indicated at the outset of my testimony, I think we need to show Washington that we can build transmission in our own state to address our reliability needs and to integrate renewable resources at a much lower cost and with vastly greater benefits than the long distance alternatives some seem to be favoring. 10

11 Thank you, Chairman Maziarz for this opportunity to assist your Committee in examining the important issues raised by the Indian Point facility and planning for our future power grid in New York State. Our upcoming publication of Power Trends and the Gold Book is important information for you to consider, and I will forward these to you as soon as they are issued at the end of this month. We are happy to assist you in any way. 11