From the Monday, 7/23/02 NY TIMES

Bloomberg Sees Need for More Power Plants in the City

Mayor Michael R. Bloomberg said yesterday that the city was in desperate need of more power plants after the major explosion and fire on Saturday at an electrical transformer on the East River.

City and Consolidated Edison officials feared that the damaged power system would cause more power failures as usage increased on the first normal workday after the explosion, but no major blackouts were reported yesterday despite temperatures that reached 90.

Even so, officials continued their call for customers across a large section of Lower Manhattan to use electricity sparingly until the utility is able to replace a destroyed transformer and other damaged equipment inside a substation at the site of the explosion, the East River Generation Station, which stretches along 14th Street from the Franklin D. Roosevelt Drive to Avenue C. Con Ed said it was still unclear whether the plant would be able to deliver enough power to the roughly 63,000 customers in the affected area, from 14th Street to Battery Park, west of Broadway.

Even without Saturday's explosion, the city faces problems generating enough electricity. Several new plants have been approved for construction, but power generation companies have had a hard time attracting financing, which means no major source of electricity is expected to come online in the city until 2004.

Several power generation companies have complained that Gov. George E. Pataki, the Legislature and the state's Public Service Commission, which regulates utilities, have not done enough to make the power market competitive, discouraging power companies from investing in the state.

Mayor Bloomberg is among those who see a need for more plants. "We do not have enough power generation or distribution facilities and it is very difficult to site and to build those facilities," he said yesterday at a groundbreaking for new housing in Chelsea. "But if we don't address those problems now we are going to find ourselves down the road with more blackouts and shortages."

The mayor added, "We got lucky in this case. It turned out it did not do that much damage. It turned out it was on a Saturday. It turned out it was on a day when humidity wasn't all that bad. If those combinations of things hadn't been true, it would have been much more serious."

The blackout on Saturday was the worst that the city had seen since Inwood and Washington Heights went dark in 1999. This power failure was caused by a fire in a transformer at the East River substation. That substation feeds two substations on the west side in Lower Manhattan, which serve Battery Park City, SoHo, TriBeCa, the West Village and Greenwich Village. (Before Sept. 11, Battery Park City and some parts of TriBeCa were served by two substations that were destroyed in the collapse of 7 World Trade Center).

Yesterday, Con Ed officials acknowledged that there was construction going on at the East River plant at the time of the fire, but said that the burned transformer was hundreds of feet from the work.

Louis L. Rana, Con Ed's vice president for electrical operations in Manhattan, said it still was not clear exactly what had caused the fire. He stressed that two other minor power failures last week were not connected to the problem on Saturday.

Mr. Rana said people should to conserve electricity while repairs continue.

"We have had a massive fire and we are doing extensive work at our East River station, so my message would be that people in Lower Manhattan should still conserve energy," he said.

Mr. Rana and other officials at Con Ed, which has sold most of its generating plants and is primarily in the distribution business, also echoed Mayor Bloomberg's concerns about the need for more power plants.

"In the future, we expect the electrical demand in New York City to increase and we need generation behind it," Mr. Rana said. "We see the same shortages into the future that the mayor sees."

The Public Service Commission, whose members are appointed by the governor, and other state agencies have approved six new power plant projects, including three in New York City that would provide 1,450 additional megawatts of electrical power by the end of 2005. But at least one of those projects - the 1,000-megawatt SCS Energy plant in Astoria, Queens - has been stalled because of difficulties in finding financing, according to the Independent Power Producers of New York, which represents power generators.

Few of the other private generation projects presently under review have secured adequate investments to move forward. Power producers say that investors have been wary in the wake of the Enron scandal and are also concerned about existing price caps, environmental laws and other regulations in New York.

"There is a vital need for more power in New York and Long Island," said Gavin J. Donahue, executive director of the Independent Power Producers. "The New York marketplace is not anywhere near where people estimated it would be when deregulation started five years ago because of policies that were instituted on the state level, the economy, the Enron issues and Sept. 11."

David Flanagan, a Public Service Commission spokesman, defended the state's efforts. He said that approving power plants continued "to be a top priority for all of the agencies involved" and that "there continues to be a significant amount of interest in investing in these types of projects in New York."

There are 10 applications for new plants currently under review. "I think it shows itself by the number of applications that we have and I think that New York has generally been recognized as having a very solid foundation for a competitive market," Mr. Flanagan said.

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