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Power Struggle

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In the wake of Pataki's decision, a new generation of energy companies scrambled to claim a slice of New York City's $8 billion energy market, buying up Con Ed's old plants and applying for licenses to build new ones. All the companies -- including KeySpan, Enron, Orion Power Holdings, and 1st Rochdale Cooperative -- control different parts of the process. Some own power plants; others purchase that power and distribute it to consumers.

The theory behind deregulation -- for New York, California, and about 30 other states -- was that a free market would encourage companies to build new power plants, which utilities never had an incentive to construct. With consumers free to choose energy providers -- known as energy-service companies, or escos for short -- companies would compete to supply electricity at the lowest possible rate.

So far, though, the deregulated market hasn't been very competitive here. Fewer than 2 percent of New Yorkers have switched from Con Ed to another energy provider -- many don't even know they have a choice -- and the anticipated price decreases haven't panned out.

Neither did the expected new plants -- new generating companies like Keyspan and Orion have been producing energy in plants they purchased from Con Ed -- partly because New York is such a difficult market to enter. "If you're a developer who wants to build a plant and you're deciding between Texas and New York, you have to consider that you're going to spend a lot more resources trying to get into New York," says Lance Brasher, a lawyer who represents power companies at Skadden, Arps in Washington, D.C. "The process is far more cumbersome in New York. The regulations are all the same, but you have to jump through a lot more hoops to get the same approval and you have a stronger element that is resisting."

As of yet, none of the generation companies that want to do business in New York have been able to get the necessary permits to build new plants. "There are proposals to build as much as 4,000 megawatts of additional capacity in the metropolitan area," says David Flanagan, a spokesman for the New York State Public Service Commission. "It can be frustrating," says Liam Baker, an asset manager at Orion, which is in the process of getting approvals to build a new plant on the site of an old Con Ed facility in Queens. "You have to deal with a cornucopia of agencies: the Department of Environmental Conservation, the Department of Health, the Economic Development Corporation, the Department of Transportation, and the ISO. It's a process that could definitely be streamlined."

But though deregulation is largely responsible for getting us into this mess, it may also be the best hope we have of getting out of it. As generation companies expand and upgrade existing Con Ed plants, they're learning how to cooperate with communities. At choke's request, for example, both Keyspan and Orion have agreed to "repowering programs" to clean up the existing plants as they add new capacity.

Deregulation gives companies an incentive to upgrade older, less efficient plants with modern technology that's also cleaner. Since new "combined cycle" generators operate with roughly twice the fuel efficiency of older "simple cycle" technology, all of the power plants in the development pipeline will use that system. "Think of power plants as if they were cars," says the ISO's Steven Sullivan. "If you had to drive upstate in a Honda Civic, it would be a reliable, relatively inexpensive trip. But what if you had to pull your grandfather's 1965 Mercury Marquis out of the garage? The Marquis is a gas guzzler, and if you run it pedal to the metal the whole trip, it'll be superexpensive and you'll have a breakdown."

Tommy Thompson pops the escape hatch on the top floor of a midtown co-op and dashes across a gusty stretch of rooftop with the frantic resolve of someone trying to catch a getaway chopper. He halts suddenly, cocks his head back, and scans the sky. Nothing. He peers into the canvas tote bag that dangles from his elbow, removes a black box the size of a toaster, and places it at his feet. Then he tilts his face into the sun and widens his iridescent blue eyes. It seems completely conceivable that he's trying to summon a flying saucer.

Thompson is a renewable-energy guru, and he's figuring out the proper placement for an array of solar panels he's going to install on the roof of this 800-unit apartment building. The black box is a device that helps him determine the angle of the sun. "The exposure up here is dy-no-mite," he shouts. "This is the highest building around, so we don't have to worry about shadow." His eyes dart toward the power plants that line the Queens side of the East River. "No Dark Side here!"

Thompson is one of the few energy experts in New York City thinking outside the grid. "The bottom line," he says, "is that if customers are going to be able to pay their utility bills, they have to be breathing!" A reedy jokester given to wearing a purple fanny pack, Thompson directs the sustainability division of 1st Rochdale Cooperative, a two-year-old not-for-profit esco focused on improving clients' energy efficiency and providing the cleanest energy possible.

In December, 1st Rochdale launched its "Green Apple Initiative," aimed at installing solar panels, microturbines, and emission-free fuel-cell generators onto 1,600 New York City businesses and residences over the next ten years. Metered by 1st Rochdale, such installations will pump electricity directly into buildings, bypassing the grid and its attendant pressures. While they won't meet all of a building's energy needs, 1st Rochdale provides electricity from traditional generators to make up the shortfall.

Though it requires a considerable investment, using diverse energy sources makes economic sense in the long run. Richard Perez, an energy researcher at suny Albany, found that New York's peak-load periods correspond to the days when the city gets maximum exposure to the sun. Since those are also the times when prices spike and supply gets scarce, solar panels are one obvious solution.

"We are at an energy crossroads," Gupta says. "Free-market forces, environmental regulations, and technological innovation are dramatically changing the landscape of the energy industry." Even the Pataki administration is beginning to catch on: Six years after eliminating the New York State Energy Office, the governor in January doubled his funding for subsidies to offset investments in clean technology and energy-efficient appliances; soon after, he proposed tax credits for energy-efficient buildings.

Two years ago, architect Robert Fox oversaw the completion of Condé Nast's 4 Times Square headquarters, the first building in New York to incorporate renewable-energy technology, in the form of fuel cells on the fourth floor and solar panels built into the upper part of the structure's façade. "A building that is environmentally smart is economically smart," says Fox, who predicts that by 2005, every new building that goes up in New York will incorporate energy-saving measures.

Since Fox paved the way, dozens of existing buildings, from the New School to the Cathedral of St. John the Divine, have made plans to install rooftop solar panels. And the Building Congress recently launched an outreach program to educate real-estate owners and commercial tenants about conserving energy with insulated windows, efficient heating and cooling systems, and sensors that shut off unneeded lights and appliances.

But the most ambitious energy innovation could be a building Fox has planned with developer Douglas Durst, a proposed office complex that would occupy a full city block between Eleventh and Twelfth Avenues and 57th and 58th Streets. It would include its own power plant -- six gas turbines with emissions filters -- with sufficient generation capacity to stand independent from the city's grid. "The Durst building is a model of the way we should build buildings in the future," says Thompson.

Many of the tenants will need the energy. The space not used for offices will serve as a telecom hotel, Fox explains, "one of the energy-guzzling buildings that's partly responsible for causing such a huge increase in energy demand."


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