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2003 BLACKOUT HUMAN AND ECONOMIC IMPACTS $1 billion in lost economic activity in New York City alone 1 15 million New Yorkers left without power, many for 24+ hours 2 400,000 people stranded after entire New York City Transit subway system stopped 3 Hundreds of flights at grounded at Kennedy, LaGuardia, & Newark airports 4 40,000 New York City police officers and the entire New York City Fire Department mobilized 5 96 deaths in New York City 6 1 USA Today, Northeast residents struggle with effects of blackout, August 14, 2003: http://usat.ly/1c4terx. 2 Initial Report by the New York State Department of Public Service on the August 14, 2003 Blackout, Feb 2004: http://bit.ly/195cjgu. 3 US Dept of Transportation John A. Volpe National Transportation Systems Center, Effects of Catastrophic Events on Transportation System Management and Operations, May 2004: http://1.usa.gov/15inhem. 4 CNN, Power returns to most areas hit by blackout, August 15, 2003: http://bit.ly/1cetxfi. 5 CNN, Major power outage hits New York, other large cities, August 14, 2003: http://bit.ly/1cetxfi. 6 Fox News, Spike in deaths blamed on 2003 NYC power outage, Jan 27, 2012: http://fxn.ws/yvk7pm.

August 14, 2013 marks the ten-year anniversary of the dramatic and costly Northeast blackout that impacted 45 million people in eight states and parts of Canada. The blackout caused $6 billion dollars in total economic losses, revealed the vulnerability of our electric power system, and demonstrated the critical role electricity plays in our daily lives. Blackouts are not merely an inconvenience; they are extremely costly and a threat to public safety. The risk of future widespread power losses in New York remains unacceptably high and we must take numerous steps to reduce the odds of re-occurrences. This issue brief compares the condition of New York s electric grid in 2003 with its current state today and discuss 10 steps which should be taken to assess and prevent future blackouts. The New York Affordable Reliable Electricity Alliance (New York AREA) was formed shortly following the 2003 blackout as a coalition of business, labor, and community leaders, and independent energy experts committed to preventing future blackouts by addressing New York s underlying energy challenges. Our mission is in our name: to promote policies that lead to affordable and reliable electricity.

NEW YORK STATE POWER SNAPSHOT: 2003 2013 In order to determine the most effective, economically efficient, and environmentally-friendly solutions for avoiding severe blackouts, we must first review what has changed and what has not in the last ten years. 2003 VS 2013 TOTAL GENERATION & TRANSMISSION CAPACITY Generating Capacity in 2013 37,925 MW 7 Generating Capacity in 2003 35,347 MW 8 Change: +7.3% Total Circuit Miles of Transmission 2013 11,005 miles 9 Transmission Capability Added Since 2000 1,655 MW 10 2003 35,347 2013 37,925 +7.3% Total Circuit Miles of Transmission 2013 11,005 MW Added Since 2000 1,655 Source: New York Independent System Operator (NYISO), 2013 Power Trends Report 7 New York Independent System Operator, Power Trends 2013 By the Numbers, May 2013. 8 US Energy Information Administration, Electric Power Industry Generation by Primary Energy Source, 1990 through 2010, State Electricity Profile: NY, January 30, 2012. 9 New York Independent System Operator, Power Trends 2013 By the Numbers, May 2013. 10 IBID

2003 THROUGH 2013 GENERATION ADDITIONS & RETIREMENTS Generation Added Since 2000 10,098 MW 11 Generation Retired Since 2000 5,800 MW 12 2,500 2,433 Retirements Additions 2,000 1,754 1,917 MWh 1,500 1,126 1,000 534 619 606 807 626 808 947 737 500 347 459 420 380 308 249 123 4 21 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: New York Independent System Operator (NYISO), 2013 Power Trends Report YEAR 11 NYISO, Power Trends 2013: Alternating Currents, May 2013, p. 22 12 NYISO, Power Trends 2013: Alternating Currents, May 2013, p. 22

2003 VS 2012 TOTAL ELECTRIC DEMAND Total Usage in 2012 162,842 GWh 13 Total Usage in 2003 158,012 GWh 14 Actual Demand Increase (2000-2012) 8,089 GWh 15 Forecast Demand Increase (2012-2022) 9,910 GWh 16 Forecast Peak Demand for 2013 33,279 MW 17 Actual Peak Demand Summer 2013 33,955 MW 18 2003 158,012 Source: New York Independent System Operator (NYISO), 2013 Power Trends Report GWh 2012 162,842 GWh NOTE - NEW ELECTRIC USAGE RECORD SET IN 2013: The New York Independent System Operator had originally estimated peak demand for summer of 2013 to reach 33,249 MW. On July 19, during the sixth day of a week-long heat wave, the NYISO reported that peak demand set a new record with 33,955 megawatts (MW), surpassing the previous record set in 2006. 19 13 NYISO, Power Trends 2013 By the Numbers, May 2013. 14 NYISO, NYISO Table I-4a: Historic Energy Requirements and Coincident Peaks, 2013 Load and Capacity Data Gold Book, p.16 15 NYISO, Table C-3: Annual Energy and Summer Peak Demand - Actual & Forecast, 2012 Reliability Needs Assessment, September 2012, p. 78. 16 NYISO, Table C-5: Annual Energy by Zone Actual & Forecast, 2012 Reliability Needs Assessment, September 2012, p. 85. 17 NYISO, Power Trends 2013 By the Numbers, May 2013. 18 NYISO, Heat Wave Drives Record Electricity Usage in New York, News Release, July 19, 2013: http://bit.ly/1bwphns. 19 NYISO, Heat Wave Drives Record Electricity Usage in New York, News Release, July 19, 2013: http://bit.ly/1bwphns.

RELIABILITY AND FUTURE BLACKOUTS Electric reliability measures the performance of the entire electric grid, including generation and transmission assets. A deficiency in either component creates the potential for reliability deficiencies. Ten years after the 2003 Northeast blackout, New York s grid is still largely made up of an outdated transmission infrastructure. The potential for reliability loss and all-out system failure is a major concern among New York s business and labor communities. New York AREA has identified the following ten key challenges and the basic solutions to ensure grid reliability. CHALLENGE #1 GENERATION LACK OF NEW PLANTS COMING ON LINE The state legislature s delay in renewing the Article X power plant siting statute (finally renewed in 2012), in addition to other regulations, limited the development of new generation infrastructure over the last decade. This was further complicated by the fact that power plants typically take a minimum of five years to get online from conception to operation. SOLUTION: To ensure New York attracts power plant proposals and investments, the state needs to provide clear and reasonable environmental restrictions on plants. Additionally, the New York Board on Electrical Generation Siting and the Environment must make clear and expedient decisions with regard to the siting of new power plants. CHALLENGE #2 GENERATION PREMATURE RETIREMENT OF PLANTS Many plants are being retired while they are still capable of safely and efficiently generating electricity. This can occur for a number of reasons including onerous environmental regulations, aging infrastructure, and political pressures. Of particular note, the New York State government has been aggressively seeking to close the Indian Point Nuclear Energy Center, which supplies 25 to 30 percent of New York City s electricity and 11% of New York State s power. SOLUTION: Every effort should be made to retain existing generation that can be operated economically with some modification. In addition, the state should recognize and accept the determination by the U.S. Nuclear Regulatory Commission s independent experts that Indian Point is an extremely safe facility, and withdraw its opposition to and legal actions against the 20-year extension of Indian Point s operating license.

CHALLENGE #3 TRANSMISSION NEW YORK HAS FAILED TO MAKE ADEQUATE INVESTMENTS IN THE ELECTRIC GRID About 80 percent of New York s transmission infrastructure was built before 1980. A 2012 report by the New York State Transmission Assessment and Reliability Study (STARS) board found that approximately $25 billion must be spent to replace large sections of the New York electric power grid. 20 SOLUTION: Transmission investments are very costly and need to be prioritized so that the greatest efficiencies are realized. The Governor s Energy Highway Proposal will be important in meeting our transmission needs. As such, we encourage the state to identify and pursue on a priority basis those investments that will have the greatest benefit to the greatest number of consumers and businesses. CHALLENGE #4 LACK OF FUEL DIVERSITY INCREASES RISKS FOR ELECTRICAL CONSUMERS The mix of fuels used to generate electricity in New York has changed over the past dozen years, with increases in generation fueled by natural gas and the emergence of wind-powered generation. The New York state legislature has mandated that by 2015 just two years from now 30 percent of the electricity used by New Yorkers must come from renewable resources. 21 Electric grid reliability can be negatively impacted when it is over-reliant on any single fuel source, whether it is wind, nuclear, natural gas or solar. California, Germany and other countries have had dire experiences with price spikes, as well as other unanticipated economic and environmental problems, as a result of their over-reliance on these types of renewables. SOLUTION: Maintain and expand diverse fuel sources, including entities that provide 24/7 base load power, such as nuclear, natural gas, hydro, and coal, and intermittent energy sources such as wind and solar to ensure a diverse and reliable electric grid. CHALLENGE #5 ENERGY IMPORTS TOO MUCH OUT OF STATE POWER New York currently relies too heavily on power imported from New Jersey, Canada, Connecticut, and elsewhere. In periods of high demand, this power is less available to the state s electric grid. New York should reverse this trend and instead focus on generating enough power to not only meet its own needs but perhaps also to be in a position to export excess capacity to other states. This will ultimately lead to an increased energy supply, job creation, and economic growth. SOLUTION: Electricity is a manufactured product that was first publicly deployed in New York City. To create well-paying, sustainable, highquality jobs and protect our infrastructure, New York should set a goal of being self sufficient and maybe even a net power exporter by 2020. 20 National Grid, Statewide Transmission Study Identifies Projects to Improve Electric System Reliability, Lower Costs and Support Renewable Generation, News Release: http://ngrid.com/13gb8bb. 21 NYISO, Power Trends 2013: Alternating Currents, May 2013, p. 22

CHALLENGE #6 STRONG GROWTH IN DEMAND Growth in demand for electricity has been on an upward path for decades, and is projected by most experts to continue. Over the past 15 years, electricity use in New York State increased by 11 percent. 22 The combination of population growth and more electronic devices, appliances, and electric vehicles will cause this demand to further increase. According to the US Energy Information Administration, total electricity demand is expected to increase by 31 percent between now and 2035. 23 SOLUTION: Public policies should be based on meeting anticipated demand rather than assume that the future adoption of energy efficiency and other austere measures will curtail energy consumption at present levels. NEW YORK ELECTRIC ENERGY TRENDS Then Now Source: New York Independent System Operator (NYISO), 2013 Power Trends Report 22 NYISO, Power Trends 2013: Alternating Currents, May 2013, p. 17. 23 US Energy Information Administration, Residential and commercial sectors dominate electricity demand growth, Annual Energy Outlook 2011, April 26, 2011: http://1.usa.gov/1bxlslp.

CHALLENGE #7 EXTERNAL FORCES STORMS/CLIMATE CHANGE Superstorm Sandy and Hurricane Irene left millions of New Yorkers without power for days, some even for several weeks. With the frequency of extreme weather events on the rise, a significant focus should be placed on hardening the electric grid to prevent or reduce the impact of storm and other weather-related power disruptions. SOLUTION: Con Ed s request for a modest rate increase to harden the grid and protect against future Superstorms should be approved by the Public Service Commission. CHALLENGE #8 POTENTIAL CYBER ATTACK ON THE GRID Experts and policy makers have continually warned that America s adversaries are looking for ways to unleash cyber-attacks that would disable our electrical grid. SOLUTION: There needs to be full federal funding to ensure that all such cyber-attack prevention programs provide us with the greatest security possible. CHALLENGE #9 ABSENCE OF SMART GRID TECHNOLOGY The deployment of a smart grid technology offers many benefits, including the ability to quickly reduce power when demand spikes rise, and to use power more efficiently. Yet, transforming the grid with this expensive and complicating technology will take time. SOLUTION: It is important for utilities and energy regulators to continuously educate the public about the benefits and opportunities that smart grid technology offers. CHALLENGE #10 WASTEFUL ELECTRICAL BILL COMPONENTS The Public Policy Institute of New York has found that 25 percent of a typical New Yorker s electricity bill can be attributed to arcane taxes and surcharges that help balance the state budget and fund preferred pet projects. SOLUTION: These utility tax assessments must be reviewed to ensure that ratepayer dollars are being used solely for electricity infrastructure improvements. This includes the 18-a assessment, a two percent tax on all electricity bills that was initially implemented as a stop-gap measure to the fiscal crisis in 2009, yet remains in place today.

CLOSING OBSERVATIONS While New York faces many challenges to developing more affordable and reliable electricity, we should approach these problems with optimism and determination. The current situation is tenuous and unacceptable, but it can be rectified. Maintaining a world-class generation and transmission system will provide longterm stimulus to New York s economy, reduce carbon and other toxic emissions, and enhance public safety. However, these challenges and opportunities cannot be realized overnight. They require a sustained determined effort. Indeed, the same resolve and patience that New Yorkers showed on August 14, 2003 must be emulated by policy makers today.

ABOUT THE AUTHORS DR. MATTHEW CORDARO is the former Chief Executive Officer of the Midwest Independent System Operator, the non-profit grid operator serving 15 states and a province of Canada. He serves on the Advisory Board of New York AREA and is also a former CEO at utility companies. ARTHUR JERRY KREMER is a former Chairman of the New York State Assembly Ways & Means Committee and an author of the state s first power plant siting law, Article X. He is Chairman of New York AREA. ABOUT NEW YORK AREA Founded in November 2003, the New York Affordable Reliable Electricity Alliance (New York AREA) is a diverse group of more than 150 business, labor, and community groups whose mission and purpose is to ensure that New York has an ample and reliable electricity supply, and economic prosperity for years to come. New York AREA helps to educate policy makers, businesses, and the general public regarding the necessity and importance of safe, low-cost and reliable electricity. WWW.AREA-ALLIANCE.ORG