Did You Know

NYPA and LIPA Rely on Competitive Power Suppliers

The New York Power Authority (NYPA) and the Long Island Power Authority (LIPA) have begun relying on competitive proposals from companies who specialize in power plant development, operations and sales to secure future supplies of electricity for their customers. NYPA has issued a request for proposals (RFP) for a long-term power purchase agreement (PPA) with third-party suppliers to provide as much as 500 megawatts (MW) of power starting in 2008.

NYPA will consider bids from new or existing power plants under the RFP, as well as from new and existing transmission facilities. Consideration will be given to “newer, cleaner energy sources of generation and to other solutions, including generation produced by renewable sources that improve the environment in New York City by displacing older, higher polluting generation,” the RFP states.

Late last month, LIPA announced that it had provisionally selected a diverse portfolio of resources comprising more than 1,000 MW of new supply and load reduction technologies to meet its future energy needs. The announcement culminated more than a year of review and analysis of four different LIPA RFPs between January 2003 and February 2004.

The NYPA RFP followed NYPA President and CEO Eugene Zeltmann’s announcement at the Independent Power Producers of New York’s spring conference last month that NYPA is prepared to forego building new generating capacity in New York, instead leaving new construction to competitive suppliers. “We recognize that it is vitally important to New York’s power industry that there be a competitive private sector,” said Zeltmann.

State Comptroller Alan Hevesi said he welcomed NYPA’s decision to seek a private supplier of power. “That is exactly the approach we were encouraging the Authority to take,” he said.

The NYPA and LIPA procurement programs acknowledge that consumers benefit when utilities adopt competitive alternatives to provide new power supply. The federal government and many states approved policies to institute electric competition in the late 1990s as a way to save consumers money. The U.S. Department of Energy has estimated that American energy consumers are saving almost $13 billion a year as a result of these policies.

When utilities turn their backs on the competitive option – either competitive bidding programs overseen by independent arbiters or negotiated contracts, consumers pay the consequences. State agencies and electric utilities that build their own generation without the benefit of a competitive market test can incur large and unnecessary cost overruns, forcing captive utility customers to bear those costs. Competition frees retail customers from this risk – cost overruns or poor investment decisions are paid for by the independent generator or marketer.

For more information regarding competitive procurement, contact Jack Hawks at jhawks@epsa.org. For more on the NYPA RFP, visit www.nypa.gov.