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Taming the “Perfect Storm” of Unaffordability in New York: Short Circuit on Energy in New York

Taming the “Perfect Storm” of Unaffordability in New York:  Short Circuit on Energy in New York: 

                        (First in a three part series on energy in New York)

Eliot Spitzer took office as Governor on January 1, 2007 announcing his intent to quell the perfect storm of high taxes, high energy costs and high Workers’ Compensation costs.  These factors have long been cited as major impediments to economic development in New York State resulting in a decline of New York’s economic power.  Nowhere was this felt more deeply than in Upstate New York which has been in economic free fall for more than 40 years.

True to his intent, Governor Spitzer rolled out proposals in the early part of his Administration that addressed high property taxes.  Property relief was implemented through increases in the homeowner’s deduction under the Star Program.  While not a full fledged assault on property taxes, it did result in a substantial decrease to residential taxpayers. Upstaters benefit from property tax relief because property taxes have been rising much faster than personal income.

With regard to Workers’ Compensation, the Governor reached a compromise with the State Legislature that is projected to result in billions of dollars of decreased costs.  Employer groups have responded positively, suggesting that their savings could range from 20-40% in premiums annually.  This will impact Upstate New York because a decrease in Workers’ Compensation costs translates directly into greater economic development upstate.

The third debilitating economic impediment comprising the “perfect storm” is the high cost of energy.  While there is great ferment in the energy efficiency and renewable energy arena–see the next in this three part series–there was no progress this year in fast tracking power plant construction.  Revision of Article X of the Public Service Law was a major priority of the Administration but it became bogged down in disputes over what kind of plants would be covered and where the plants could be built.

New York State has been without a power plant siting bill since 2003, adversely affecting the State’s future energy supply.

Governor Spitzer’s Article X proposal was intended to fast track the permitting process for clean power projects as a way to meet New York’s growing energy needs while minimizing air pollution, including greenhouse gas emissions.

The traditional energy community found this “green focus” limiting and not calculated to accomplish the timely siting of major electric generating facilities.  The proposed law had no provision for nuclear plants and required that coal plants include unproven carbon capture technologies, thus leaving natural gas, a cleaner but more expensive fuel source, as the only traditional form of power generation that could benefit from Article X. 

Also, population density restrictions in the Administration’s bill limited construction to upstate, which, was unattractive to utilities due to the lack of sufficient transmission capacity to deliver power produced upstate to higher priced markets in New York City and Long Island.  Although the population density limitations were dropped at the 11th hour, thus making downstate natural gas plants theoretically possible, other provisions were added that were abhorrent to the utility industry which promptly withdrew its support.  The legislation died

            Failure to reach accord on the siting of new generating facilities deepens the worry among some that growing demand will expose consumers to higher prices, service curtailments or both.   Moreover, upstate is vulnerable to price up ticks for additional reasons not applicable downstate.

Consider the following ten factors that make upstate and rural sections of the State vulnerable to increasing fuel prices: 

  1. In order to get to work, most upstate, and in particular, rural dwellers drive longer distances.  The more rural, the longer the distance.  Accordingly, price hikes in fuel oil make travel to one’s job, to the family doctor or the grocery store more and more expensive.  Moreover, the fact that upstate/rural dwellers earn much less than their wage-earning counterparts downstate, makes the cost of gas as a percentage of income much greater.
  2. Aggravating the cost burden of fuel oil to the upstate dweller is the cost of home heating oil.  One can easily envision a day in the near future when home heating oil cost $4-$5 per gallon, resulting in a heating bill of more than $5,000 which translates into nearly 20% of the average annual income of a rural New Yorker.
  3. Many homes in upstate, especially rural areas, are not energy efficient and in some cases are not even insulated, increasing the costs of home heating oil.  
  4. Long cold seasons further exacerbate the dependence on home heating fuel and the vulnerability to price demands.
  5. Rural regions have to import most of their household supplies and foodstuffs, yielding increased transportation charges and higher prices for these essential items.
  6. Despite promising developments upstate, many homeowners don’t have the resources to make even modest infrastructure improvements, like installing efficient light bulbs and insulation.
  7. The sprawl of upstate communities makes community heating systems infeasible, thus making economies of scale less impossible. 
  8. At existing fossil fuel prices, most renewable energy sources appear costly and beyond the reach of many upstate/rural municipalities and homeowners.  (In the third article of this series, we will look at the Energy $mart Park Initiative of the North County as a case study in how to make renewable energy, especially bio mass, more attractive in the Adirondacks.)
  9. Hydro power, the cheapest of all power sources, is generally available to big businesses and to municipalities favored with long-term contracts with the New York Power Authority, but is unavailable to most upstate communities. 

10.  Conservation techniques such as those envisioned by the Governor’s 15 by 15 are promising, and indispensable, but depend on extensive public re-education, a major challenge both upstate and downstate.

As the Administration regroups to launch another siting bill to supply downstate users with more power, it needs to also focus on the throat clutching hold of price volatility on upstate populations.  

If upstate and rural New York are not to fall further behind, energy policy must be viewed as an equity issue for all of New York, not solely as a capacity issue for downstate.  The Administration is well aware of these issues and has the problem in its sights; it needs to move fast and more comprehensively to avoid losing ground in the fight to restore the economic viability of Upstate New York.

            In my next column, we will look at the question:  Are there bright spots on the energy horizon?  Renewable energy and energy efficiency innovation in New York State. 



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