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ALBANY -- Upstaters don't want a new power line running through their back yards. New York City residents don't want new power plants in their neighborhoods. And the Legislature won't act on a plan to make plants easier to build anywhere.
Welcome to the state of energy-policy gridlock.
The recent hot spells, blackouts and new records set for energy consumption underscore the fact that the status quo can't continue indefinitely. The organization that runs the state electric market, known as the Independent System Operator, said in a report in December that by 2008, parts of the state will start to need more power than it has now. That estimate was recently pushed back to 2010, but that's still virtually the blink of an eye in energy planning since new plants take several years to build.
The problem is downstate, where the surging economy and population growth have put more pressure on the system.
A private company, New York Regional Interconnect, has proposed a 190-mile-long 1,200-megawatt power line to get more electricity from upstate, where there is a surplus, to the lower Hudson Valley.
That might sound like a good solution to residents of the metropolitan New York area, but from the upstate perspective, the line would mean despoiled land and higher electric rates with few benefits to offset new problems. Two candidates for governor, Democrat Tom Suozzi and Republican John Faso, have come out against the plan. Frontrunner Eliot Spitzer hasn't taken a position.
One solution advanced by some upstaters has been to tell New York City to generate more power of its own. But Mayor Michael Bloomberg, pointing to the obvious congestion and the noise, added traffic and other side effects of the plant, has come out against a plan to build a new power plant on the Brooklyn waterfront.
For most of the state's history, a state agency would be called upon to referee such a regional dispute. But New York has been deregulating the electric market, figuring that the private sector could do a better job at delivering power efficiently than the government.
Since 1999, when deregulation started, it hasn't worked out that way for the most part. Prices for virtually all customers downstate have gone up since deregulation began, as well as for industrial customers upstate. Residential customers upstate have been protected by agreements signed by utilities during the deregulation process that guaranteed stable or slightly lower rates. But many of those will be expiring in a few years.
Maybe a lesson to be drawn here is parallel to what is happening now with oil prices. One reason gasoline prices are so high, oil companies tell us, is that there is a shortage of refining capacity. So why don't the oil companies build more refineries? Well, you don't see the shareholders of oil companies moaning about the high price of gas.
So if power generators built more plants, the supply of electricity would go up and the prices would come down. Sounds good to consumers but not so good to shareholders.
Making problems worse for New York electrical consumers is growing use of natural gas to generate electricity. While many states, especially in the Midwest, depend largely on cheap (and environmentally dirty) coal to generate electricity, New York has many plants fired by relatively clean natural gas, which used to be cheap but is now expensive.
And the way the electric market is structured, the gas-fired plants set the price in the short-term markets so that electricity produced by cheaper fuels, like nuclear power and hydropower, becomes more expensive.
The lesson here seems to be that free markets have their limits, especially if they're not watched carefully. The classic case is Enron, the now-defunct Texas-based energy company synonymous with corporate greed and mismanagement, which manipulated the price of electricity in California by withholding supplies, driving prices sky-high and reaping huge profits.
No dramatic change is likely to be made in the waning days of the Pataki administration, but energy policy is something that his successor is likely to have to face early next year.
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